Rolling Over? Markets Look Toppy To Me…

As I wrote about last week, we are entering what is historically the worst stretch of time for the market. I’m not sure why this is the case, but September is by far the toughest month for stocks. This past week demonstrated that history repeats itself with a 3% selloff in the Russell 2000.

I’m not a big technician by nature, but judging from the chart it’s pretty clear that the Russell has been in a channel and is poised to test the lower end of the range soon. In addition, the string of lower highs is disconcerting. This is a time for caution overall, in my opinion.

That being said, I remain very long within the TW universe and believe quite firmly that companies with strong balance sheets and game-changing technologies will outperform in any market. And, one never knows when these stocks are going to take off. All it requires is one or two large buyers to come along and the stocks could be gone.

A great example of this is Hancock Jaffe (HJLI). This past week, Perceptive Advisors put $20 million into HJLI through a private placement. Generally private placements cause weakness in a stock, but not this time. Perceptive is considered to be the smartest healthcare fund out there and their investment is a resounding endorsement of the Company.

Despite the weak overall market, HJLI was up 7% last week. With the Company expected to announce the first patients enrolled in their pivotal any day now, I think the stock will continue to do very well. Hancock is trading for around 1.5X cash, is fully funded and has a medical device with a large unmet TAM. The data has been excellent and this stock could double and be cheap. Perceptive was very…uhhh, perceptive?…in making this timely investment.

So, I don’t like the market much right now but I’m willing to ride it out. My portfolio is full of excellent opportunities and I’m not going to give up positions in front of what I believe to be a confluence of some of the most exciting catalysts I’ve seen coming over the next couple months.

My September to Remember thesis remains intact despite last week being forgettable…

Also trading higher this past week, ParkerVision (PRKR, up 9%) announced a settlement in one of their multiple ongoing patent infringement cases. The suit against Zyxel was not one of their bigger ones, but it is the second suit to settle and, as such, it demonstrates a trend and takes on increased significance.

Parker has Markman rulings coming up in October for both HiSense and TCL, which are both bigger companies than Zyxel. These rulings will take place in the same courtroom where Parker recently crushed Intel (INTC) in a Markman. Since we’re talking about the same patents, this doesn’t bode well for either TCL or HiSense.

I expect both companies will seek settlements before they waste too much of their time and money on fighting what increasingly appears to be an uphill battle. For really big companies, settlements in the mid-single digits millions is really peanuts and they could easily spend that much fighting a losing cause, basically doubling the eventual cost.

As we await the actual trial dates in the Qualcomm (QCOM) and Intel trials, these settlements are setting a dangerous precedent for patent infringers. It’s very tough to argue non-infringement of a patent that other companies have validated with a settlement and ongoing royalties. The trend is really in Parker’s favor.

In addition, I expect to see as many as ten additional patent cases coming announced by ParkerVision in the coming months. Several of these are likely to be even bigger cases than the ones that have been settling, although none of the scale of Intel or Qualcomm. Parker is setting itself up for a nice revenue stream of settlements and ongoing royalties that will easily fund the big cases.

When are the big cases actually going to trial? We should hear a date for the Qualcomm case sometime in the month or so. That courtroom has been closed due to Covid. They are meant to start hearing cases soon and, once that happens, the judge should announce the lineup of future cases. We are getting close, people.

Meanwhile, the Intel case was recently pushed back to June, but that was for a good reason; WiFi infringement was added to the lawsuit. This is a big deal as Intel has close to a 20% market share in WiFi and potential damages are going up dramatically as a result of this. Along with potential ongoing payments. Judge Albright has been keeping his courtroom open all through Covid and I believe this is a timeline that will be kept. And, one that should make Intel think settlement over the next 6-9 months.

Parker remains a very binary stock. However, every piece of news seems to tilt the scales of justice in ParkerVision’s favor lately. Settlements and Markman rulings, along with a general trend to support patent holders over big tech, suggest that the likelihood of a positive outcome outweighs that of a loss. With the upside potential multiples of the downside, PRKR is an attractive stock to own in my opinion.

We had a call with Ondas (ONDS) this past week. The next couple weeks could be very interesting here. First off, there is an upcoming analyst data at their AR (drone) subsidiary. Drones are hot and I don’t think Ondas gets much credit for this side of their business.

Secondly, there is a major RR industry show coming up. I’m looking forward to this event as Siemens is one of the largest presenters there and their booth is going to highlight the Ondas relationship.

Ondas is still awaiting their first big railroad orders. Until they get them, the stock isn’t likely to make a huge move. However, I think this upcoming show will allow investors to get a sense of Ondas’ positioning as a partner to Siemens, which is rather dominant in this industry.

Basically, I’m excited to see how much Siemens is betting on Ondas. If they truly put a big effort into this relationship, we’ll see it and have a chance to gain great comfort prior to the company inking deals. And, that’s the key to investing, right? Getting ahead of the curve.

Having rallied 30% the prior week, INmune Bio (INMB) continued its roller-coaster journey, closing down 19%. This despite a KOL event at which the Company demonstrated very clearly that XPro1595 is showing improvement in brain function among all participants that were given the drug in their phase 1 trial.

First off, I highly suggest you listen to the KOL call if you have an hour to invest in your portfolio. Or, if you only have 15 minutes, go to the part where Max (the CEO of Imeka) speaks. He very simply and concisely lays out the data that demonstrates XPro’s amazing effect.

Secondly, the selloff in INmune demonstrates that this stock continues to be dominated by aggressive trading funds. There was a planned, coordinated effort to take the stock down after the KOL event. After the fact, I was made privy to comments posted prior to the call about these plans (which are not illegal, btw).

If you’re a trader, INMB is the gift that keeps on giving. It runs into data and sells off after. “Buy the rumor, sell the news” has never worked so well, so often, as with INmune.

For us investors, however, the stock is undervalued and I’ve seen a lot of frustration being expressed by shareholders. Don’t be frustrated. INMB hit a new all-time high on Tuesday and the stock has performed well overall. Yes, it could (should!) be higher right now but the stock has outperformed and will likely continue to build momentum.

Eventually, the science will win out. To repeat what I said earlier, INmune’s XPro is demonstrating improvement in brain functionality. No one has ever seen this before. Like, EVER!

Recall that Eli Lilly (LLY) went up by $20B in market cap when they demonstrated slower decline in cognition versus placebo in a phase 2. The drug is somewhat, marginally, effective. Great…

Many investors seem concerned that we won’t get any Alzheimer’s data from INMB for a couple years. I look at it as, in two years INMB will likely show better data than anyone ever has in an AD trial and that’s worth many billions. My opinion, the stock doesn’t languish at $400M market cap until the day data is presented.

But, that whole “no AD data for two years” investment thesis overlooks what could be an equally, if not more, exciting NK cell program. 

The two things to remember about cancer trials is that there are no placebo patients and that biomarkers are very accepted endpoints. This means you get meaningful data early and often.

The first patient treated with the lowest dose of INKmune demonstrated amazing results. We can expect to see more data from this patient very soon. We should also get data from the second patient sometime in October. Investors can brush off one patient as a possible outlier. A second patient showing great results becomes a trend.

The INKmune program could start getting equal recognition to NK programs at companies like Fate (FATE) and Century (IPCS) very soon. Those companies have shown results that are actually not as impressive as those of INmune. If the INKmune program’s results maintain their strong showing, we are looking at a blockbuster. And, this will all get revealed over the course of the next 6 months.

So, don’t let the coordinated attack bother you. Don’t panic. Things are going exceedingly well at INmune and the stock is poised to bounce back on data soon. And, once it gets above $500M market cap for good, I think we’ll see a multi-billion dollar valuation follow sooner than you can imagine.

No SLACKing Allowed…

One of the biggest benefits of being a premium subscriber to TW is our Slack chat room. Here are two ideas that have been discussed in here beyond the typical TW stocks.

There’s been a lot of chatter (and money made) in my Slack chat room around Uranium. It’s been en fuego lately. The easiest play people seem to like is URA, a uranium ETF. I’m not a big commodities playuh myself, but this is one to keep your eye on.

AEHR Test (AEHR)has been doing great. They continue to get large orders and are a big beneficiary of the worldwide demand for semiconductors. Several investors have been high on this for a while.