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Beware Of Moderna; Value Investing’s Death Exaggerated

Beware Of Moderna; Value Investing’s Death Exaggerated

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3 years ago

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Whitney Tilson’s email to investors warning to beware of Moderna and reports of value‘s death may be greatly exaggerated.

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Beware Of Moderna

1) Only two months after stocks experienced their sharpest decline in history, they've ripped higher. So it's no surprise that pockets of foolishness are emerging... which my team and I are tracking so we can warn you about things to avoid.

In that spirit, I asked Empire Financial Research Senior Analyst Steve Culbertson to identify some stocks that appear to have soared far above what their fundamentals justify (to be clear, these are not short recommendations). Here's the first of a series that I'll be sharing:

Moderna Inc (NASDAQ:MRNA)

Investors have gotten excited about companies developing treatments for COVID-19. Moderna is a high-profile candidate for a vaccine based on its mRNA technology. But many years ago, SARS taught us that coronaviruses, which mutate quickly, pose unique challenges to vaccine developers. What's more, Moderna faces stiff competition in its pursuit.

Its stock skyrocketed after the company released news of supposed positive results in its Phase I trial. But careful reading showed a limited study with real concerns. Worse, we learned that insiders began selling a lot of stock after it popped.

The only way Moderna can justify its sky-high valuation, exceeding $22 billion, is if it creates a very large and profitable business – perhaps one that rivals GlaxoSmithKline's (GSK) vaccine division. We think that's highly unlikely. Shares are down 34% since peaking on May 18, but they could go much lower. Don't jump in to catch this falling knife.

Value Investing's Death Exaggerated

2) Following up on Friday's e-mail about how cheap small-cap value stocks have become, here's another study showing that, based on one measure of price-to-book ratio, value stocks are the cheapest relative to growth stocks that they've ever been, going back to 1963: Reports of Value's Death May Be Greatly Exaggerated. Excerpt:

  • Value investing has underperformed relative to growth investing over the last 13.3 years. The authors examine several popular narratives to explain this relative underperformance, including technological revolution, crowded trade, low interest rates, growth of private markets, and traditional measures of value that ignore internally generated intangible assets. These narratives purport to explain why "this time may be different" and why value's poor relative performance may be the "new normal."
  • The authors demonstrate that the primary driver of value's underperformance post-2007 was growth stocks getting more expensive relative to value stocks.
  • The authors explore whether book value is the right denominator for value. In today's economy, intangible investments play a crucial role yet are ignored in book value calculations. They show that a measure of value calculated with capitalized intangibles outperforms the traditional price-to-book measure, particularly post-1990.
  • With today's value vs. growth valuation gap at an extreme (the 100th percentile of historical relative valuations), the stage is set for potentially historic outperformance of value relative to growth over the coming decade.

This table from the study shows that the current 13.3 years of value underperforming growth is both the longest and deepest such period in history:

value vs growth Beware Moderna

The post Beware Of Moderna; Value Investing’s Death Exaggerated appeared first on ValueWalk.

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Ripple’s XRP price jumps 5% fuelled by Singapore licensing acquisition amidst crypto market downturn

Ripple’s XRP emerged as one of the rare gainers during a subdued 24 hours in the cryptocurrency market that saw Bitcoin (BTC) and other top digital assets…

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October 4, 2023

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Ripple’s XRP emerged as one of the rare gainers during a subdued 24 hours in the cryptocurrency market that saw Bitcoin (BTC) and other top digital assets lose their value.

Data from CryptoSlate reveals that XRP surged by approximately 5%, reaching $0.53018 as of press time. This uptick follows Ripple’s significant victories during the reporting period as it secured licensing in Singapore and Judge Analisa Torres rejected the U.S. Securities and Exchange Commission’s (SEC) plea for an interlocutory appeal.

Ripple’s Singapore licensing

Earlier today, Ripple said its subsidiary, Ripple Markets APAC Pte Ltd, secured a “full” Major Payments Institution (MPI) license from the Monetary Authority of Singapore (MAS) to provide digital payment token services in the country. The crypto payment country received an in-principle approval from the regulator in June.

The MPI license enables businesses to operate free from daily and monthly transaction limits. To qualify, the business must possess a Singaporean-registered company or branch, maintain a permanent business address for record-keeping, have a minimum capital of $250,000, and appoint at least one director with Singaporean citizenship or residency.

Ripple CEO Brad Garlinghouse described Singapore as a “progressive jurisdiction” that has ” developed into one of the leading fintech and digital asset hubs striking a balance between innovation, consumer protection, and responsible growth.”

Besides that, Judge Torres’s decision provides a closing chapter to the legal tussle between the company and the SEC for this year, with both parties scheduled for trial by April 23, 2024.

Selling pressure on the horizon

Despite this recent surge, XRP still confronts substantial selling pressure due to Ripple recently releasing one billion tokens from its escrow system.

Top 10 Assets by Market Cap. (Source: CryptoSlate)

While the crypto payment firm immediately relocked 800 million XRP, the company still holds 200 million tokens that could add more than $100 million in selling pressure to the market, potentially altering the current upward momentum of the asset.

The post Ripple’s XRP price jumps 5% fuelled by Singapore licensing acquisition amidst crypto market downturn appeared first on CryptoSlate.

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Blockchain finance to grow into $79.3B market by 2032

COVID-19 pandemic-induced disruptions in traditional finance, coupled with the promise to reduce operational costs set the stage for the mainstreaming…

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October 4, 2023

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COVID-19 pandemic-induced disruptions in traditional finance, coupled with the promise to reduce operational costs set the stage for the mainstreaming of the digital ecosystem.

The global blockchain finance market — encompassing public and private blockchains, trading, payments, settlements and asset management — is well-positioned to grow into a $79.3B market by 2032.

A report by Allied Market Research revealed that the blockchain finance market players are heavily exploring collaborations and acquisitions as a top strategy. COVID-19 pandemic-induced disruptions in traditional finance, coupled with the promise to reduce operational costs set the stage for the mainstreaming of the digital ecosystem.

The public blockchain sub-segment accounts for dominant market share. Source: Allied Market Research

In 2023, the public blockchain sub-segment represents the lion’s share of the type of blockchains being used worldwide. Bitcoin (BTC) and Ether (ETH) are some of the prominent crypto ecosystems that use public blockchains. Public blockchains come with numerous upsides, as explained in the report:

“Public blockchains leverage significant computational power, making them ideal for maintaining large distributed ledgers associated with financial transactions. These factors are anticipated to boost the blockchain finance market.”

When it comes to the applications of blockchain finance, cross-border payments and trading are two of the largest sub-segments, driven by the rising demand from individuals, enterprises, merchants, industries and international development groups.

The cross-border payments and settlement sub-segment accounts for dominant market share. Source: Allied Market Research

As shown above, the trend is expected to continue as users continue to seek cheaper alternatives to move their savings across the world. North America dominated the blockchain finance market in 2022 and is expected to maintain its lead for blockchain finance adoption.

Blockchain finance market report highlights. Source: Allied Market Research

Based on the quantitative analysis of trends and dynamics of the blockchain finance industry, Allied Market Research predicted a compound annual growth rate (CAGR) growth of 60.5%. Based on the estimates, the industry is poised to grow into a $79.3 billion market.

Related: Beyond finance and Bitcoin: How blockchain is disrupting secure messaging

A report recently published by digital payments network Ripple revealed that blockchain could potentially save financial institutions approximately $10 billion in cross-border payment costs by the year 2030.

“In the survey, over 50% of respondents believe that lower payment costs — both domestically and internationally — is crypto’s primary benefit,” the report notes. The statement complements Allied Market Research’s report, which bases its growth trajectory prediction on cheaper and safer alternatives.

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CBDC lays foundation for new global monetary system: French central bank

The first deputy governor at Banque de France calls central bank digital currency “the catalyst for improving cross-border payments.“
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October 4, 2023

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The first deputy governor at Banque de France calls central bank digital currency “the catalyst for improving cross-border payments.“

Representatives of Banque de France, the French central bank, have embraced the global perspective on the central bank digital currency (CBDC) discussion, touting it as the foundation of a new international monetary system.

On Oct.3, Denis Beau, the first deputy governor at Banque de France, called the CBDC “the catalyst for improving cross-border payments by enabling the build-up of a new international monetary system.” The official emphasizes the necessity of considering cross-border issue around CBDCs from the outset and not as an afterthought.

Related: Head of Portugal central bank deems crypto unsustainable, calls for global regulation

Beau sees several paths for developing a CBDC. The first is the development of common standards and interoperability between wholesale CBDCs and legacy systems. The second — promoted by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) — is the development of regional or global CBDC platforms. Wholesale CBDCs could be standardized to be exchanged directly on these platforms and perform payment versus payment and delivery versus payment transactions.

Beau cited the example of Project Mariana, which explored the possibilities of an automated market maker (AMM). The project, involving the Banque de France, the Monetary Authority of Singapore and the Swiss National Bank, successfully concluded in late September.

The official talked not only about the CBDCs but also about the tokenization of finance. He expressed his belief that the public sector must support the private sector more to enable the full potential of blockchain while limiting the risks. In his opinion, tokenized “central bank money availability” and tokenized assets are allies rather than competitors.

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