Hiding From The Bear

Last week I wrote about selling the rally. The economy is slowing and inflation isn’t going away. It’s a trader’s market and moves need to be faded. Last week’s weakness in the markets fell right in line with my thinking.

Similarly, a few weeks back I wrote about tariffs and how I thought the concerns were likely overblown. Turns out that call was spot on as Trump backed down and the world returned rather quickly to some version of sanity (under DJT, sanity is truly defined differently) and stocks rallied.

Right now, I think that the downside in the market is just starting. The Bear Market Rally is over and I think we test the lows. We probably break through them. I’m bearish.

Yet, looking at my companies, I’m optimistic. I see reasons to TW’s stocks and think that the recent stretch of strong performance from the portfolio is just beginning. Selectively, I’m bullish.

Where I’m going with all this is that we are in a very unsettled time. This is a fact that is evident to all and clearly not new news. This is truly a time of transition where divergent forces are pulling in many directions. No on seems to know what to do nor what comes next.

However, there remain undeniable trends taking place in the world and there are opportunities to profit from them. Neither a bear market nor even a full blown recession can stop progress and technological/scientific advances will always move forward. This fact is inevitable and why I continue to feel comfortable with my stocks.

One of these advances is A.I. It’s game changing for the world and is only going to accelerate no matter what tariffs are in place nor how the government bond sale goes. So many stocks have done great on the back of A.I. and valuations are sky-high, but there’s still opportunity here.

Would I own NVIDIA (NVDA) at these prices? Heck no. The chart looks like it’s rolling over and the Price to Sales is tough to justify.

But, what about Vicor (VICR)? The next generation of datacenter buildouts is essentially designed with Vicor’s power modules in mind. NVIDIA is a customer as is the lesser known Cerebras. If you want to get even more excited about the future of A.I., check out this video put out by Cerebras.

Seeing the compelling future put forth by Cerebras, it’s easier to look through the current turmoil in the markets/world and realize that there remains a lot of opportunity. Vicor powers Cerebras. They are poised to be a winner.

Sticking with A.I., Aeluma (ALMU) is an even more exciting play on the space. Earlier stage and, as such, riskier, Aeluma’s technology is potentially game-changing in chip manufacturing for next-generation A.I. applications such as quantum-dot lasers used in A.I. infrastructure. Here’s a great article in E.E. Times that speaks to the potential for Aeluma.

While A.I. is an clear and present trend that is dominating technology investment, a less obvious area of growth is coming in healthcare. I say less obvious as drug development takes a lot longer than technological advances. Thus, the investments are not as noticeable in the near term but the longer term implications remain huge.

The area of focus I’m referring to in healthcare is inflammation. As INmune Bio (INMB, I consult to them) has been saying for years, they treat inflammation as a disease. While this may seem obvious to a lot of you, the medical community has been treating it as a symptom of issues, not a cause. That is changing.

Signs of this sea-change are obvious in peripheral inflammation. The GLP-1 agonists are booming and are rapidly becoming the world’s largest selling drug franchises. However, in neuro-inflammation, things are just starting to get interesting.

Sanofi’s announced acquisition of Vigil Neuroscience (VIGL) last week is a clear sign that the major drug companies are now realizing that neuro-inflammation is a real target. Paying $600 million for an early stage company with a target (TREM-2) that has yet to show great results demonstrates the growing excitement in this space. The majors are just now starting to get interested; they need to catch up.

Every reader of this newsletter knows my pick in this space is INmune. Results from our phase 2 trial in Alzheimer’s Disease come in late June, when we hope to answer the question of “What happens when you properly treat neuro-inflammation?” We’re now less than 40 days away from knowing the answer.

There’s always a bull market somewhere…

My last article about Gold seemed to top-tick it, at least temporarily. I would suggest that all the macro issues taking place will continue to push Gold higher and, as markets retreated last week, Gold made a nice bounce back towards highs. I think that will continue through to much higher prices.

Also hitting new highs is Bitcoin. Bitcoin has acted like a leveraged (to the upside) play on risk. When risk is on, it goes up…a lot. When risk is off, it goes down; but not as much. It oscillates with stocks but the trend has continually been higher.

The selling point on both Gold and Bitcoin has been a hedge against money printing and inflation. Gold has acted that way for the last year or more while Bitcoin has just acted like a proxy for investor risk. This past couple weeks has seen Bitcoin finally performing as the zealots had hoped. Despite the market selling off, it hit new highs.

While I prefer Gold, both instruments are acting like hedges against the macro turmoil. Buy select micro-caps, buy Gold/Bitcoin, and short the S&P 500. That trade looks like a winner in my books.

The Russell 2000 rebalance came out and it’s got a few additions of note. Atomera (ATOM) and Aeluma (ALMU) from TW’s universe. Is this what got Aeluma up 15% on Friday? Could be…the float is tight and comprised of what looks like true believers. This could be a very interesting R2K addition over the next month.