REITs or Real Estate Investment Trusts provide current cash on cash returns in addition to a piece of increasing real estate values.
Alexander D. Goldfarb, Managing Director and Senior Research Analyst, Piper Sandler.
Essex Property Trust is one of the 3 top picks from Alexander D. Goldfarb. Mr. Goldfarb is a Managing Director and Senior Research Analyst at Piper Sandler.
Previously, he was a Managing Director and the Senior REIT Analyst in the research department of Sandler O’Neill + Partners, L.P.
Mr. Goldfarb joined the firm in 2009 following two years as a Director and Senior REIT Analyst at UBS and five years at Lehman Brothers, where he was a Vice President and REIT analyst.
“Any good real estate person would tell you, it’s never been a better time to own real estate, right?
If you ever find a real estate bear, you know they’re not involved in the industry.
So, that’s for starters.
That said, last year was certainly a tough one for REITs.
They definitely underperformed the broader market on elevated interest rate concerns.
And this year is no different; the 10-year has been volatile so far.
It was trending up towards 5, now it’s pulled back in.
The group was selling off, now it’s rallying.
So, the macro is what’s driving the performance of the stocks, less so the fundamentals.
What’s really interesting, and one of the reasons why we’re so bullish on real estate, is if you look back since the end of the Second World War, every time this country has had a boom-bust in real estate, there’s either been excess inventory, excess availability, some issue in the banking system — and if you look today, we actually have none of that.
Occupancies are pretty healthy.
We have economic and employment growth.
Very little new supply, even in apartments, where there is a massive supply wave that’s coming to an end this year.
The cost of construction is daunting, such that for the most part, it doesn’t really pencil.
Banks aren’t providing construction loans, so anyone who is building is doing it from their own pocket.
And the final element are the banks, which the regulators are not pressing to foreclose, so a lot of lenders are doing blend and extend.
I think initially there was a general view that blend and extend was not a legit strategy, but people have quickly come around to realize that it’s no different than if a freighter runs aground: The owners don’t immediately call in the breakers to rip the ship apart and junk it, right?
They wait for the tide to do its thing.
Will the tide be able to refloat the ship?
Same thing with loans.
Just because a loan may not be compliant with today’s lending terms doesn’t necessarily mean it’s a bad loan if the lender and the operator can see where the income growth of that property is going.
Clearly, there will be bad loans. No NOI, it’s going back to the lender.
But otherwise, the regulators realize that there’s no point in pressing banks to aggressively foreclose or recapture, take back loans if they don’t have to.
And the positive for REITs is, because the REITs tend to be lower levered than the private sector, and they have access to public equity, they’re just in a better capital position to be able to execute their plans and take advantage of real estate that comes to market.”
REITS or Real Estate Investment Trusts are Alexander Goldfarb’s bread and butter.
“Right now, real estate is actually in a great position.
Think about rents that are biased to the upside, because replacement cost still exceeds where buildings are trading at and there is no new supply; you have a growing economy; and tenants are much more conscientious about the quality of the landlord.
What that means is that dividends should steadily grow, and asset values should increase.
The hindrance to asset values is rising debt costs, but assuming debt costs stabilize and then the rent streams grow, that’s a positive for valuations.
So, REITs should be able to prove that they have an upward bias and inflation protection about them.
And in an environment like today, where we still have inflation pressure, that should be a positive.
If you look at the Trump policies’ bigger picture — less regulation, more energy production, getting government out of the way — these are all positives.
I don’t think many people would say having government involved in the market is a good thing.
It’s like elementary school; you don’t want the teachers in the playground.
You do want the teachers watching to make sure that kids aren’t fighting with each other, but you don’t want them directing how kids are to play.
And that’s what government should be — make sure that the rules are enforced, make sure that everyone is staying in their lane, make sure that at least the way the markets operate is fair.
But as far as how companies interact, how the private sector works, that’s something that the private market should do.
Pulling government out of that, promoting more energy production, more natural gas, more oil — people forget that tractor-trailers drive, figuratively and literally, a lot of the economy.
You can see it right now, that the push into EVs or windmills or solar ends up adding cost, and it makes the grid more unstable, it makes energy costs higher, it pulls dollars away from other areas that could be put to work in a better fashion.
The interesting thing is, people will say, well, tenants today, they want green buildings, or they want renewable. I disagree.
People want inviting environments.
There’s no one who says, give me a dirty, less efficient building.
People want windows, they want a lot of natural light, they want open landscapes.
They don’t want pollution.
But when you build a building and you make it efficient for operation, and it has all the qualities that the tenants want, that’s the important part, not necessarily a check the box.
As a result, I think under Trump, real estate benefits in that regard, because hopefully it means that there’s less focus on getting a green stamp of approval versus building efficient buildings that tenants want.
Often they may be the same thing, but not always.”
There are 3 REITs that Alexander Goldfarb recommends.
“Our top pick for the year is Essex (NYSE:ESS), and this was done at the beginning of the year, before the L.A. fires, so it’s not related.
The reason why we picked Essex as our top REIT for the year is we like the market positioning.
Very little new supply on the West Coast versus the rest of the country.
Second, you had the continued unwind of the COVID rent moratorium; apartment units are replacing non-cash-paying renters with actual legitimate cash ones.
And then finally, Northern California has lagged since COVID and rents have barely moved, whereas rents everywhere else are up 20%-plus.
So, there’s a lot more upside, especially as tech hopefully this time gets back to work in the office.
So, we like Essex a lot.
There’s another company, Curbline (NYSE:CURB), which is the spinout of SITE Centers (NYSE:SITC), focused on convenience retail.
What’s really impressive about this story, apart from the fact that it was well seeded with capital — $800 million in cash, debt free balance sheet — is rarely in REITland do you see management teams take on an entirely new challenge.
Meaning, this management team said, you know what, SITE is a good company, but it doesn’t have the future that we think can be competitive, so we’re going to create this new company and spin it out of SITE, call it CURB, and focus on convenience retail assets.
And they haven’t said it, but our view, and the market’s view, is SITE is going to be liquidated, similar to what this management team did with RVI a number of years ago.
That really captures people’s attention, because they are truly taking 100% risk.
If they stayed at SITE, they could just clip a coupon on compensation, try their best, and attend NAREIT twice a year.
Here, they’re actually trying to create a whole new company, and that’s something that we generally don’t see often, apart from IPOs.
I think that speaks volumes.
The company is well set up.
Earnings growth north of 10% a year.
Certainly from a balance sheet capital position, well stocked.
And, so far it’s resonated well with investors.
Another name that we continue to like is SL Green (NYSE:SLG).
The management team is highly productive.
Whenever they have announcements, it’s almost always good.
Hard to think of an announcement they’ve had that has not been additive.
And they really have a lock on Midtown office around Grand Central, which is one of the hottest, if not the hottest, submarkets for office in the country — that and Century City in L.A.
So, they’ve really done well in concentrating their portfolio, and they’re benefiting right now as availability rates on Park Avenue have dropped below 7%.
Even in premier office, availability is below 7%.
Rents continue to move upward.
And what’s good for the buildings is that the operating expenses and the leasing costs really don’t change, so all of that accelerating rent just drops to the bottom line.”
REITs are the investment vehicle focus for 2025. Read all the interviews, exclusively in the Wall Street Transcript.
High yield publicly traded companies are available in the current market, for example the Plymouth REIT yields close to 6%.
For example, Jeff Witherell runs the highly regarded industrial Plymouth REIT.
Jeffrey E. Witherell, CEO and Chairman, Plymouth Industrial REIT
“The data will show you that the smaller spaces are performing better than the larger spaces.
And again, there are more users for 50,000 square feet than 500,000 square feet, just by definition.
An example would be Columbus, Ohio.
If you looked at their vacancy rate last year, it was approaching 14%, but 10% of that was the bigger box and 4% was the smaller buildings.
You can see the same with Indianapolis; most of the vacancy is sitting in the larger boxes.
The second part of that is that when a developer builds a warehouse doing speculative development, outside of just the cost of doing it, the developer can make more money by building a bigger building and then selling it.
It’s just that economy of scale in the sense that if they can put $100 million to work in a large building and they can make a profit off of it, it’s probably going to be larger than if they built a 100,000-square-foot building.
There’s a variable cost, obviously, of the construction of a larger building, but your design, permitting, bringing water, sewage, power to the facility, things like that, those are fixed, whether you’re building 200,000 square feet or 1 million.
The speculative development over the last three or four years has been mostly concentrated in the larger buildings — it’s more profitable for them to build those — and that’s where we’ve somewhat overbuilt.
That’s not my opinion, that’s the data.
The data shows that these 1-million-square-foot buildings are sitting empty for extended periods of time, where we are right now.
That should get absorbed over the next several years, and we should be back to a much healthier market for those sized buildings.”
The high yield from Plymouth will be supported by well researched trends in the marketplace.
“At the very end of the year, we announced the purchase of a portfolio of properties in Cincinnati for about $20 million.
That was Phase 1 of the portfolio; Phase 2 should be closing soon, and that is going to add another $20 million of real estate in Cincinnati.
So the second part of that should be closing here momentarily, and then we have a few other things under contract.
This Cincinnati property is a Plymouth property.
It’s a perfect example of what we would call shallow bay, about 260,000 square feet.
There are about 20 tenants in there, and the WALT that I mentioned before is just under three years.
Again, we like the ability to work with smaller tenants, be able to renew them, and then obviously mark-to-market the rent.
The rents in those spaces are going to be below market, and when the renewal comes up over the next two to three years, we’ll be marking those rents to market, so there will be an increase in rent for us.
That’s how you grow the business, and that’s how you increase income and dividends to shareholders.”
David Spreng , Founder, Chairman, President, CIO & CEO Runway Growth Finance Corp.
“Runway Growth Capital was founded in 2015 to be the investment adviser to Runway Growth Finance Corp., formerly Runway Growth Credit Fund Inc., a private business development company that is now publicly traded under the ticker symbol RWAY.
Shortly after inception, I was joined by Tom Raterman, our CFO and COO, and Greg Greifeld, our CIO and Head of Credit.
Over the course of the next 15 months, the balance of the BDC was raised.
We went public in 2021.
Our mission is to support passionate entrepreneurs in building great companies.
We are like venture capital, except VCs invest in equity, i.e., they own a piece of your business, while we invest in debt or make a loan so that your ownership isn’t diluted.
We lend capital to companies looking to fund growth with minimal dilution, primarily in the technology, health care, and select consumer industries.
In turn, we aim to produce superior risk-adjusted returns. We do this through our publicly traded BDC, as I mentioned, RWAY, and our private partnership, LPGP funds.
We operate from office locations in Silicon Valley where I sit, Chicago, New York and Boston.
In October of last year, we announced a definitive agreement for Runway Growth Capital to be acquired by BC Partners Credit, the $8 billion credit arm of BC Partners, a leading alternative investment firm with approximately $40 billion of AUM.
Through careful growth and strategic partnerships, we’ve been able to expand our offerings and continue building a portfolio that totals approximately $1.3 billion of AUM for Runway.”
The high yield is supported by a superior position in the balance sheet.
“We specialize in providing first lien loans.
That means first money out if something goes wrong.
They’re all senior secured debt financings to late- and growth-stage companies with investments typically ranging from $10 million to $100 million.
Though we expect our target range to increase to $30 million to $150 million following the combination with BC Partners Credit.
Our strategy is focused on constructing a high-quality portfolio of senior secured loans to differentiated companies in tech, health care, and select tech-enabled consumer services, including both sponsored and non-sponsored opportunities.
We are a principal preservation, credit first, downside focused private debt manager, prioritizing lending to established businesses with substantial revenues, significant enterprise value, and proven in-demand products or services well beyond the prototype stage.
I can give a couple statistics on the portfolio.
Roughly, our average company is doing well over $100 million in revenue.
It’s been around for more than 15 years and it’s raised more than $150 million of equity capital.
So, we believe these aren’t high-risk startups.
These are very advanced, late-stage, venture backed, and occasionally PE-backed companies.
One might historically think of venture debt as being focused on early-stage companies.
That is not the case.
We do not lend to early-stage venture companies that present equity-like risk.
We’re very much focused on credit first, a considerably safer investment in as advanced companies as we can find.”
New Lake sports a high yield of over 10% at current prices, albeit in a sector that has its issues.
Anthony Coniglio, President, CEO and Director, NewLake Capital Partners Inc.
“We founded NewLake back in early 2019, when we saw the opportunity to provide much-needed real estate capital to this emerging high-growth industry that is the cannabis industry.
What was unique about it was the opportunity to step into an industry that was highly regulated but had a significant disconnect between state and federal law that drove a significant gap in the capital available to the industry.
In particular, we noted that real estate was critically important to this industry — to cultivate, manufacture and dispense — and because of the federal prohibition on cannabis, it eliminated all traditional forms of real estate.
Most real estate carries debt, and those debt provisions include a restriction on leasing only to businesses that are legal, and so cannabis businesses by definition violate all those real estate debt agreements.
Therefore, you had a significant gap in the properties available to the industry versus the needs of the industry.
We thought we could get above-market yields, and indeed we did and continue to get above-market yields that reflect the uniqueness of what we do, the lack of competition, but also there’s an element of risk premium that’s in the pricing as well.
Having been around business for over 35 years now, I’d say there are few stories where the competitive landscape is better six years after you started versus when you did.
We sit here today in January of 2025 as the second-largest owner of cannabis real estate in the United States.
We own 32 properties across 13 states with 12 of the leading cannabis operators in the country, names that people who are familiar with the industry would be well aware of, like Curaleaf or Cresco or Trulieve.
We continue to have what we think is the best portfolio that’s out there, and it’s a testament to the underwriting approach.
And so to summarize, the opportunity set was, there was very little competition providing real estate capital to the sector.
We stepped in, we started the company, we’ve deployed over $400 million, second-largest owner, and quite frankly, many of the competitors that were existing when we started and were developed during our life cycle have fallen away.”
The high yield is supported by extensive real estate investment experience.
“But because we’re also a real estate investment trust, we complemented that with lots of real estate experience.
Some of the readers may be familiar with our Chairman, Gordon DuGan.
He was the CEO of W. P. Carey, one of the largest triple net lease REITs in the world. He left W.P. Carey to run Gramercy Property Trust, and took that business from a roughly $300 million market cap company and sold it to Blackstone for over $7 billion.
He’s been involved in real estate for his nearly 40-year career, as has Peter Martay and David Weinstein, other people on our board, so significant real estate experience.
What we’re trying to do is marry that cannabis experience with the real estate experience, and develop an underwriting approach that combines that expertise. Here are two examples.
One is the deal structure.
We understood this is an emerging industry, and so from the beginning, when we structured our leases, we always included provisions that would anticipate financial difficulty or regulatory uncertainty.
One example would be, we always cross collateralize security deposits and cross default leases amongst the different properties, in a way that makes it easier to preclude default and position us well should there be financial difficulty.
We also look at the jurisdiction.
This is critically important, because we focus on jurisdictions that are limited license.
When you think about cannabis, this is very much a state-by-state business.
The way New York approaches cannabis is different than the way Pennsylvania does, and different from Florida, different from Illinois, etc.
Understanding those nuances is critically important.
We focus on those states where there’s not a proliferation of licenses, the way you would see in Oregon or Michigan or in Colorado, where many of the financial difficulties have been.
It’s a state such as Pennsylvania, where you have to go to a package store to purchase liquor, where there’s a limited number of licenses and those licenses have intrinsic value, and they also create a better operating environment for the tenant, which improves the cash flow profile of the property.
If you improve the cash flow profile of the property, you’re improving the likelihood you get paid rent.
I’m going to leave it there, and say this combination of significant real estate experience with significant cannabis experience and focusing on these limited license states — that has allowed us to preserve and grow value for our shareholders.”
All these interviews with high yield public companies and more are available exclusively in the Wall Street Transcript.
Craig Nicol, Founder and CEO, Graphene Manufacturing Group Ltd.
Craig Nicol is the Founder and CEO of Graphene Manufacturing Group Ltd.
Mr. Nicol has a career of over 20 years in delivering large-scale innovation including leading multi-billion-dollar gas and LNG value chains in Australia and Asia Pacific and managing sales and marketing teams across Asia Pacific working for Shell International.
Mr. Nicol has a bachelor of engineering degree in manufacturing systems (Honors) and a bachelor’s degree in business marketing from the Queensland University of Technology.
Mr. Nicol is a member of the Australian Institute of Company Directors (AICD) and is also the Chair of the Australian Graphene Industry Association (AGIA).
“The first product is a coating which is just being sold around the world and we’re waiting on an EPA approval for the American market.
The graphene coating provides greater heat transfer and also very long corrosion resistance.
One of the longest corrosion resistant coatings in the world.
So generally, we target air conditioning coils, LNG plants, and now electronic products to remove heat.
We can substantially change the heat signature of computers and phones and electronics with that.
And we’re talking to many large manufacturers about that.
The second product is a graphene lubricant.
That is a small dosage amount of graphene in oil which then reduces your friction in your engine, which then reduces your fuel use.
We have been testing this product for some time; it’s fully developed, but we’re just doing final testing.
We’ve been testing this product for about a year and a half and we aim to come out with an update on that shortly.
Generally, we see about 5% to 10% savings in fuel with a very small amount of our product blended in with a very economic price.
So, it’s quite a big opportunity for very large fuel burning companies.
The third product, which we just launched recently, is called SUPER G.
SUPER G is a graphene additive which can go into lithium-ion batteries.
They’re in small doses to increase what is called their rate tolerance, which means they can charge faster.
We’ve been making this product for a number of years and it’s actually half of our fourth product, which is called the graphene aluminium-ion battery or aluminum-ion battery.
Now that is the one that most people want to come and talk to us about.
We’re developing an aluminium-ion battery technology internally with University of Queensland, who invented this particular battery and we have a patent and license around that.”
Air conditioning seems prosaic but in a time when everyone is building data centers, it becomes a growth trajectory for graphene products that expedite the data center process flow.
“…We have a coating which has now been in development for six years that has been proven to make air conditioners more efficient just by spraying the coating on the outside of the air conditioning coil, and then it also makes heat sinks more efficient.
Heat sinks are basically the device that you have in your computers and your electronics just to remove heat so electronics can work at an OK temperature.
And in our model, which is signed off by University of Queensland we can show a 39% reduction in size when our coating is applied, which is a massive reduction in weight and volume for the heat sink.
Or you can keep the same size of the heat sink when you apply our coating and you can instead increase its performance so you can push more heat through, which is what a lot of companies want to do now.
So that’s now we’re working with 15 to 20 large manufacturers globally, all very much leaders in their field.
Generally, America and China are where our manufacturing customers are, and we’re working with them.
Some of them have already got products tested and approved.
Now they’re going into manufacturing testing which is the final stages of testing.
Now we’re obviously keen to see that push forward into significant revenue.
So that’ll be good for us, and then to be able to show that this product can really be in many different sectors.
We recently got the product of the year award for the Australian industry for air conditioning, which is quite a prestigious award.
And then we also got a number of awards in the global data center industry where we’re doing a lot of work with data centers to reduce their energy costs in different locations around the world.
So, there are many applications, but we’re leading with air conditioning.
But I think electronics are probably going to come up faster and probably take over in terms of volume because the amount of interest we’re getting is really quite extraordinary.”
There is an EPA regulatory hurdle in the US, which may or may not be affected by current Federal budget cuts.
“…We make this graphene material, which as I said is a new material.
It’s basically carbon.
It’s what’s called carbon allotrope or carbon material.
There are four types of carbon.
There’s diamonds, there’s coal, there’s graphite and graphene.
The graphene is the fourth type, and the others are all quite commonly used.
And graphene, it has basically got all the same properties.
It’s the mother structure of life.
However, it’s a new material.
So, it’s got to go through all of the safety and environmental approvals.
We already have them in place for Australia to help produce and sell here.
And we went through the pretty rigorous nanomaterial laws to do that.
We already can sell into Europe, Canada, China, Mexico, many countries.
Pretty much every country in the world we want to, except America.
So, we’ve already got a partner for distribution in America called Nu-Calgon.
We’ve already launched that with them and they’re one of the largest air conditioning chemical distribution companies in America based in St. Louis, Missouri.
So, what we had done is submit an approval for 10 tonnes about a year and a half ago for the graphene coating, which would have been plenty because there’s very little graphene used in the coating.
And we submitted it as per requirement and then the EPA basically asked us to resubmit, but with an unlimited amount which would suit their regulations better.
So, we had to resubmit and that’s taken us almost a year to be able to put in a different form to resubmit.
And we’ve just done that.
We’re going through the EPA review of that right now.
It’s quite an involved process.
But what that means is we’ll have pretty much an unlimited volume into almost any market.
We’re waiting for that to come in for revenue because then we can then kickstart a revenue with Nu-Calgon and into America.”
Get the complete interview and read the CEO projections about the scale to profits, exclusively in the Wall Street Transcript.
Ajay Mehra, CIO and Founder, Foresight Global Investors
Ajay Mehra is Founder and Chief Investment Officer at Foresight Global Investors.
Prior to founding Foresight, Dr. Mehra was Managing Director and Head of Equities at Salient Partners where he created and managed the firm’s global equity strategy.
Dr. Mehra also was Managing Director and Head of Manager and Fund Research at UBS where he rebuilt the firm’s manager and fund selection platform and advised on over $300 Billion in assets.
Previously, as a Partner and Portfolio Manager at private equity firm Columbus Nova, Dr. Mehra co-managed a global macro fund and a long biased global equity fund.
Prior to that, he was Managing Director and Head of Equity Research for State Street Research, where he was the lead portfolio manager for a Health Sciences fund (selected as the Lipper Best Health Sciences Fund 2003 and 2004) and a Large-Cap fund.
Dr. Mehra first started managing institutional money at Columbia Management Group where he was a Senior Vice President and Portfolio Manager covering Media, Telecom, and Consumer and Healthcare sectors.
He started his Wall Street career at Morgan Stanley where he was the firm’s ranked Consumer Products analyst.
Before coming to Wall Street, he was Assistant Professor of Strategic Management at West Virginia University’s College of Business and Economics. He received B.S. and MBA degrees from Panjab University in Chandigarh, India, and received a Ph.D. from the University of Massachusetts.
His experienced perspective on global markets leads to some interesting investment decisions.
“I think the most important thing is that in the U.S., of course, the markets had this tremendous run with huge multiple expansion and a very narrow market.
So, for most people the question is, should they cash out or should they stay in.
Globally, I would say that there’s a little more sense of cautious optimism because the U.S. is basically almost 70% of the global market capitalization now.
It’s about a quarter of the global economy.
So, maybe some of the global markets can catch up, but that also depends on the dollar.
The dollar has been very strong also.”
The next phase of this current bull market may well be overseas.
“I think the administration’s business friendly approach is already discounted in the marketplace.
I think the uncertainty remains with respect to tariffs.
There’s probably more bark than bite.
There’s some concern about the deportations — what impact it will have on unorganized labor for certain sectors.
But I don’t think it really affects that many companies in the S&P or even the Russell 2000.
It’s just more of a political issue than it is anything else.
And if the government becomes more efficient through DOGE, then that’s kind of a good thing.
But the market’s already discounting a lot of these kinds of good news.
So, if there is going to be an air pocket or some reaction to a government policy, it’s probably going to be more on the downside than on the upside.”
The US dollar is nearly at parity with Euro, Dr. Mehra has strong recommendations based on that.
“I think European markets are really cheap.
They haven’t done well in several years.
I mean, international markets are only up about 3%, 4% this year.
The S&P is up about 25%.
I don’t think most people realize that.
If the new administration tries to weaken the dollar in some way, then that could be very bullish for returns for international markets.
I think Japan still looks very good.
The emerging markets, I’m not too sure about.
Emerging markets are really again dependent on what the U.S. dollar does, but the developed overseas markets I think look good.”
Dr. Ajay Mehra has some alcohol beverage stocks in his near term buy lists.
“I think the beverage stocks, Diageo (NYSE:DEO), Pernod Ricard (OTCMKTS:PDRDF), even the beer stocks, Anheuser-Busch (NYSE: BUD), look good.
I think some of the health care stocks which have not worked this year, the pharma companies like Roche (OTCMKTS:RHHBY) could work.
In Japan, Olympus (OTCMKTS:OLYMY) is a stock that we like a lot.
Hoya (OTCMKTS:HOCPY) is another one which is very good in Japan.
I think it’s a combination of health care, and a little bit of semiconductors.
So, these are some of the things that we’re focused on.”
The returns from these markets are highly dependent on the US/Euro exchange rate.
“U.S. markets have really worked because the earnings growth has been there here in the U.S. and there’s been tremendous multiple expansion also.
You have to realize half the returns in international markets are basically dollar movement.
If the dollar remains so strong, then the returns expressed in dollars — they pale in comparison to the U.S. market returns.
And that’s why they have been reluctant to invest.
Geographical diversification hasn’t paid off.
In fact, even in the U.S., diversification within the U.S. has not paid off.
The U.S. market is basically led by seven stocks.
They are over 30% of the S&P right now.
The average stock in the S&P is only up like 7%-8% this year. The S&P is up 25%-26%.
So even here a lot of stocks present value.
I think Baxter (NYSE:BAX) looks very good, for example, to us in the health care space.
I think some of the energy names, especially oil service names, have really gotten beaten down.
Now we are value investors so we naturally gravitate to some of the value sectors.
If growth continues to work, then obviously value will underperform, but growth had a big run.
So, we think this may be time for value.”
Dr. Mehra sees US based railroad stocks as a potential beneficiary from Trump Administration policies.
“One beneficiary from onshoring is definitely U.S. railroads which have not done anything this year.
The railroads are challenged because the industrial traffic has been slow from autos and coal.
Year to date the railroads are down.
So, if there’s more onshoring here, there’ll be more stuff to move around.
Stocks like Union Pacific (NYSE:UNP), even CSX (NASDAQ:CSX), Norfolk Southern (NYSE:NSC), which have not worked and are actually down for the year, could do well.
That’s one place where I think stuff is not discounted.”
Get the complete picture from Dr. Ajay Mehra by reading his entire interview, exclusively in the Wall Street Transcript.
Patrick Kennedy, Co-Founder of Allsource Investment Management
Patrick Kennedy is Founding Partner at AllSource Investment Management. Previously, he was a Financial Adviser, Portfolio Manager and Alternative Investments Director at Morgan Stanley Wealth Management.
In addition, he worked at Cigna and Travelers. He received an M.S. degree in banking and financial services management from Boston University.
He makes his money making money for his investors and has a clear eyed strategy for the next few years.
“Inflation, for most investors, is kind of a thing of the past — we think that’s inaccurate.
We think that inflation should very much still be on the forefront of people’s minds.
And what the Federal Reserve does next isn’t a certainty to us.
So, a lot of investors think that we’re going to undergo this cutting cycle and it’s going to be loose money again.
In our view, that’s a big risk for the market because the economy is still doing really well with rates this high.
And we think that the Fed doesn’t want to be known as the Fed that let the inflation genie back out of the bottle.
So, we think they’re going to be much more cautious than most people think.”
Patrick Kennedy is developing a new private equity asset for his clients.
“We just started looking at professional sports, I want to say, 18 months ago.
We did some underwriting on the NBA.
The NBA has allowed private equity ownership for some time now.
And the first thing that we really wanted to weed out was, is this just a vanity investment? If it’s just a vanity investment for people to be able to say, hey, I own a piece of my favorite sports teams, we were going to shy away from it.
But when you do the underwriting and look at the fundamentals, the fundamentals are actually pretty sound.
For these big leagues like the NFL and the NBA, most of the revenue is derived from league revenue, which means each team there participates in the overall league revenue, driven mostly by media rights.
When you look at the power of the media rights, you have companies now like Amazon and Netflix that are just getting into this space and bidding up those media rights in a big way.
Amazon has Thursday nights for the NFL.
They have some NBA games.
And then you look at Netflix, they just had Christmas Day games for the NFL breaking all sorts of streaming records.
So that’s a big driving force of those media rights continuing to compound over time.
In fact, if you go back to 2012 and fast-forward to 2023, and you just look at the average growth rate of a franchise in the big four — hockey, football, basketball and baseball — it’s compounded at about an 18% annualized return.
The S&P has given you about 11% in that same time frame.
We think that’s really attractive.”
Uncertainty is always a given but managing uncertainty is Patrick Kennedy’s bread and butter.
“When we’re working with the high-net-worth families we serve, the macro uncertainty this year brings is very much on the forefront.
We’re not saying things are egregiously valued and we should trim a lot, but we are saying things are fully valued at this point.
So, we’re not looking to increase equity allocations at the moment simply because the market’s trading on 23 times forward earnings.
When you look at consensus, I think earnings estimates are supposed to grow at mid-teens next year and profit margins are supposed to expand by mid-teens growth as well.
We think, again, it could happen.
Obviously, most of the people out there think it will happen because it’s the consensus view.
However, when a lot of people are going to one side of the boat, we typically start to become cautious. So, we’re cautious right now on the equity markets.
On top of that, we think a lower rate environment in 2025 isn’t a certainty.
The Fed is going to be much more cautious.
And as Warren Buffett says, interest rates are gravity when it comes to asset prices, especially the stock market.
If we’re in a higher rate environment, that could be problematic for the equity markets.”
High net worth clients have interesting ways to avoid taxes.
“…There was talk about taxing unrealized gains for the ultra wealthy and raising the capital gains tax to 28%.
A lot of that obviously went away when Trump was elected, but those conversations were actively happening.
And now it’s more of a state-based conversation of, well, does California have much higher taxes than, say, Texas or Florida, and does it really make sense to live in a state where you’re going to be taxed 10%, 15% more than you would in another state?
So those conversations happen all the time, but it boils down to where you want to live.
I mean, if you have family in a certain area and your life and your business is in a certain area, it’s very hard to say, hey, we’re just going to uproot that for tax reasons.
Now, there are plenty of things we do to try and help with taxes.
One, we use qualified opportunity zones to defer capital gains.
Essentially, it’s just a way to invest within private real estate.
You take a gain, you move the whole or a portion of the gain into a private real estate investment.
It defers the gain out for at least a couple years.
There’s a proposal on the table right now that could actually kick it out for five years, meaning you wouldn’t owe on that gain for five years out if that proposal went through.
Right now, it just kicks the can for about two years.
And if you hold that private real estate investment for 10 years or longer, you actually get tax-free treatment on that gain within private real estate vehicle as well.
So, it’s a really attractive way to kick the can down the road and earn a tax-free return.
Another thing we use is direct indexing where you essentially build out a portfolio like the S&P 500 by buying all individual stocks for the client. And then we have a manager that will go in and aggressively tax loss harvest all the positions in the portfolio.
The indexes that are available include the S&P 500 or the Russell 1000 or Russell 3000 and many more.
It produces taxable losses every year while tracking the index.
So, there’s plenty of tax strategies that we use actively other than just tax loss harvesting to try and keep taxes down.
And then if a client does ask us, where is the most ideal place to rest my head six months and a day, we definitely have that conversation too, but typically those decisions are driven more by family, business location and that sort of thing.”
Get the complete rundown of all of Patrick Kennedy’s investment techniques by reading the entire interview, exclusively in the Wall Street Transcript.
Patrick Kennedy, AllSource Investment Management
email: info@allsourceinvest.com
Andrew Chanin, Co-Founder and CEO of ProcureAM, sponsor of the Procure Space ETF (UFO).
Andrew Chanin is Co-Founder and CEO of ProcureAM, sponsor of the Procure Space ETF (UFO).
Mr. Chanin created PureFunds and had been a sponsor in the ETF market from 2012-2017.
Mr. Chanin began his ETF career in 2007 working for the specialist firm Kellogg Group.
Mr. Chanin quickly worked his way up from clerk to Lead Market Maker for global and international equity ETFs, helping the company transition from its core American Stock Exchange ETF specialist business to NYSE Arca ETF market making.
In 2009, Mr. Chanin was recruited by Cohen Capital Group to build out the firm’s ETF trading capabilities.
At Cohen Capital Group, Mr. Chanin held the title of Director of International Trading, where he made markets in a variety of ETFs across various asset classes while helping to develop multiple global and international equity/ETF trading strategies for the company’s prop trading division.
“In bringing out a product that was focusing on the space industry, it was really important to us to have an interest in pure-play space companies.
And the way the fund is structured is, we track the S-Network Global Space Index.
And some of the things that they look for are a company’s percentage of revenues derived from space-related businesses, activities and services.
For us, that was an important feature to make sure that the fund had a heavy focus on these companies that were primarily space revenue focused companies, but also realizing that the space industry is one that has numerous players, and some of them may be more diversified but have very major roles.
Up to 20% of the index at time of rebalance can also be allocated towards these more diversified names.
Think of them as your more diversified aerospace and defense names.
In some cases, these are also referred to as primes in the industry.
And realizing that although they might not have the majority of the revenues coming from space, they are doing some pretty incredible things and do have fairly large space businesses underneath their hood.
It also made sense to have some exposure to those companies.
So right now there are over 30 names in the space that are in UFO.
And those names specialize in various areas across the space industry.
And it also has a global focus.
These names aren’t just U.S.-listed names.
They are names from exchanges around the globe that do have, in some cases, either a majority of their revenues from space, or they are major diversified aerospace and defense players.”
The UFO stock index investment in the Space Industry sector is now important as a long term portfolio play according to Andrew Chanin.
“I think the fact that there are adversarial nations looking to become dominant players in space, it ups the ante for any country that wants to have a strong presence there.
And by stepping off the gas and losing focus on achieving various space accomplishments, it’s opening the door for potential adversarial nations to become the leader in space.
And it’s now widespread thinking from the highest levels of the military that space is the new strategic high ground for modern warfare.
And by that, we’re talking about modern weapon systems, missiles, guidance, tracking, even secure communications and other military strategies that are reliant upon space-based technologies and services and communication.
So to the extent that other nations — which currently is the case — are demonstrating and talking to their various space-related goals, it forces the U.S. to take that seriously and to continue to remain competitive.
And many people believe that the winners over the next couple decades of this new space race are going to have a strategic advantage for potentially decades beyond that.
So it’s imperative for those that see the future importance of space and want to have a major presence there that they have a strong focus on the immediate, mid and long term of that planning.
President Trump, during his former administration, saw space as being so important, especially from the military and defense standpoint, to carve out the U.S. Space Force as its own separate distinct military branch.
And I think that type of foresight is also kind of a foreshadowing of the deemed perspective of how important space will be moving forward.
And that it demands its own specific singular focus as well.
Beyond that, all different branches of the military also rely on space for various reasons as well.
So this is something where the first space race was much more of a vanity project to say, “yes, look, we can do it, look at what we’ve done,” and we did it faster than our adversaries.
Now there’s an entire strategic standpoint where losing out on the space race isn’t an option if your goal is long-term survivability, or dominance in any of the theaters of military or even economics and commerce.”
The Space Industry has had a dramatic decrease in launch costs, mainly as a result as new innovations in reusability.
“…With the advent of reusable rockets, we’ve been able to see the costs of accessing space decrease significantly.
So, not only is that exciting for a launch company that’s able to lower costs for their customers, but also seeing the ability for those customers to now be able to justify their various projects or corporate missions, or whether you are a government or a military entity that requires space, being able to now access space at a lower cost opens up a tremendous amount of opportunities.
So the type of company that can now be considered a space company has broadened significantly as well, due to their ease of accessing space.
And that has been probably one of the major drivers that SpaceX has put forward.
Now we’re seeing other companies such as Rocket Lab (NASDAQ:RKLB) trying to utilize similar methods of reusability so that they can also provide low-cost access to space, as well as companies from around the world that are looking to compete in this launch industry.”
Get the complete interview with Andrew Chanin, Co-Founder and CEO of ProcureAM, sponsor of the Procure Space ETF (UFO), exclusively in the Wall Street Transcript.
Arik Kaufman, Co-Founder and CEO, Steakholder Foods (NASDAQ:STKH)
Arik Kaufman is the Co-Founder and CEO of Steakholder Foods (NASDAQ: STKH). In his 2,929 word interview, exclusively in the Wall Street Transcript, Mr. Kaufman relates how his company has essentially created the first Star Trek Replicator.
“The food industry is evolving like other industries. And one thing that is common to the interest of all of us, I think, is feeding the population.
The population is growing.
You have a middle class in certain countries that were non-existent a few years ago.
And someone needs to feed these people with quality alternatives.
And we come into the game by showcasing very advanced hardware that is currently used in other sectors, such as in the pharmaceutical sector, and try to harness these advanced capabilities to create amazing products.
Products that you could not imagine in the past that you can create…in 2021 we were the first company that 3D printed the largest cultured steak ever printed.
Cultured steak, meaning a steak that contained only live cells that were grown outside of the animal.
It was a 100-gram steak.
Since then, we’ve focused mainly on creating the printer and not the biological capabilities.
And today, we have already announced a few agreements that we have here in Israel and some collaborations abroad.
And we are able to mimic the texture and the taste of meat as we know it, but with plant-based ingredients.
Through 3D printing capabilities, we know how to create textures and structures that are very difficult to create at mass scale and at a cost-effective way versus other methods that are out there today.”
Steakholder Foods (NASDAQ: STKH) creates these fake steaks using a proprietary 3-D printing method.
“…the machines that are out there today, they are like machines that have been used for many, many years. And they are very limited with the structures that they create.
If I try to simplify it, think about how the outbound will always be the same as the inbound, meaning that if you have a burger, for instance, the burger inside is exactly the same as it is outside.
The 3D printing enables you to create layering.
You can determine each layer.
You can 3D print each layer by layer, and each layer can be different.
And then through layering, you can create textures and structures that are not out there today.
Assume that you haven’t eaten a whole-cut plant-based steak.
The reason that you haven’t eaten it is because it’s very difficult to create.
So, you can create it like a concept product, like in a certain restaurant, but if you want to create things at mass scale, and that’s the key, you need machines.
You need very advanced machines that will be able to create the same product systematically without any diversification.
And it’s supposed to be at a price and at a cost and at a pace that is competitive.
And I think that’s the main advantage of 3D printing.
If you think about the next level, in the future, you can integrate these premixes, these plant-based blends, with cultured ingredients.
Then you can create more sophisticated products, as we did in the past, but we did it more as a proof of concept to show that we are able to create steaks that are 100% cultured.
In the future, you will be able to do it in a cost-effective way.
You can blend species, for instance, with the printer.
You can blend species with other species, determine exactly how the matrix of the steak will be.
The possibilities are endless and it’s very transparent.
You know exactly what you put into the printer.
In the animal world, there are a lot of diseases, you don’t really know what the animal went through before it was slaughtered.
Here, everything is transparent.
It’s very stable.
And I think that it’s the future.”
Steakholder Foods (NASDAQ: STKH) strives to create and maintain this proprietary advantage.
“Since our establishment, we’ve set the bar as high as possible.
When we started the company, we stated that within two years, we will try to 3D print the first cultured meat steak, 100% cultured, with our own printer.
If you reference the whole cultured meat industry, in 2013, Professor Mark Post created the first cultured burger.
It cost him something like EUR200,000 or EUR300,000.
That’s what they said.
And we tried to set the bar as high as possible.
Within two years, we already have the hardware capabilities and the biological capabilities to create this first whole-cut 3D printing steak.
And I think that the fact that we’ve achieved it — and because we are public we announced that we’ve achieved it — I think that allowed us to downgrade the capabilities to machines that are capable potentially of 3D printing the whole cultured steak as we did, but it allowed us to create a diversified range of machines that already today can create very interesting and very exciting products, but at a price that is at a level that can be sold in grocery stores.
Because to create a concept that is not competitive with other alternatives out there, it only shows capabilities, but it’s not commercial ready.
And then we’ve shifted and focused on creating products that are commercially ready.
And today, our printers, cost-wise, the printer itself, is something that is non-material to players that want to purchase it.
And the output of the printer, the product that it prints, they’re also competitive compared to the other products in this sector.
So, I think that the key point right now is that we’ve shown that we have the technology.
We already engage with different players locally and globally.
We’ve announced an agreement that we have in the UAE.
We announced a collaboration that we have in Taiwan.
We announced a collaboration that we have in Singapore.
And as I said, our main focus right now is to try to engage with an international player.
It can be anywhere in the world, but I’m saying that Europe for sure is interesting because you have countries like the Netherlands, Germany, which are very advanced in all the relevant criteria of alternative proteins.
And our main investor base is in the United States.
So, just that fact alone drives us to engage with a significant player there also.”
Arik Kaufman is completely positive that Steakholder Foods (NASDAQ: STKH) products will succeed.
“I want investors to know that since Steakholder was founded, we have always concentrated on developing unique products that are patent-protected and with an aim to scale these products. Not concept products, but we always wanted to create something that is tangible, that is commercial-ready. And I think that we’ve reached that point after all these years.
A lot of funds were invested in it, a lot of manpower. But we are there. So, I think that the stage that we’ve reached right now is very interesting. It’s like a transformation from research and development to commercialization.
We have a few agreements here in Israel that we’ve announced. We are working very hard to secure international agreements. And I hope that once the products are out there, it will be a very exciting moment for us. And once the customers begin to taste these products and they see that there are no products like these products out there, I hope that the sky’s the limit.”
The entire 2,929 word interview is available exclusively at the Wall Street Transcript.
![Farmer Bros [ticker: FARM] President and CEO John Moore has 30 years of coffee industry experience](https://www.twst.com/wp-content/uploads/2024/11/John-Moore2.jpg)
John Moore, President and CEO Farmer Bros [ticker: FARM]
“We are a coffee roaster.
We source coffees from all over the world.
We do our roasting in our Portland, Oregon, manufacturing facility.
We’ve been in the coffee business now for more than 100 years.
It was founded in 1912 and encompasses a few different brands, including Farmer Brothers, Boyd’s Coffee, Cain’s, West Coast Coffee and China Mist Tea.
We’re in the midst of what we refer to as a “brand pyramid strategy execution.”
So, we’ve got in our commercial and traditional tier, the Farmer Brothers brand of coffee products, as well as Cain’s. In the premium coffee tier, we have Boyd’s Coffee.
And then we’ll be launching a specialty coffee brand in this next few months and going into the remainder of the fiscal year.”
John Moore has been a coffee industry participant for many years.
“I’ve been in coffee now for about 30 years.
And I think if you go back to the 1980s, you would really see a very different consuming pattern when it comes to where consumers would go to get their coffee.
It was much more driven by the local café, diner or restaurant that was known for serving quality coffee, maybe a donut shop.
Whereas today, if you think about how coffee is available to consumers, it’s been democratized in such a way that you can go to a gas station now or a convenience store.
You can go to a grocery store and there may be an espresso bar inside of a grocery environment serving quality coffee.
You obviously see the coffee aisle in your grocery store.
And whereas it used to be a very small couple of shelves, now it can be an entire row of coffee offerings in a grocery environment.
And then, of course, you have the rise of the quick-service environments where coffee is served now through drive-thrus.
You have specialty chains like Starbucks and Dunkin’ and others.
And you really see the rising tide phenomena in coffee over the last 30 years.
So, you see, yes, the traditional bastions of coffee like the neighborhood diner and the restaurants and the cafes.
Many are still there, but it’s now augmented with these other channels to market and access points for consumers to really experience coffee on their terms and define how it is they want to enjoy their coffee experience.
And without fail, in today’s day and age, they’ll most likely be able to find, within their community or area, coffee in a way that meets them where they want to be.”
Coffee is a way of life for John Moore. His strategy is to nationalize the local Farmer Bros coffee brands.
“Farmer Brothers was the supplier to the cafes, the diners, the mom-and-pop operations where people were getting their coffee from the dawn of the last century all the way through the 1980s and up until today. So, you still find Farmer Brothers being served in all of these types of operations.
I would argue that in the last 10 years, Farmer Brothers has gone through some pretty significant change, and that we’ve really started developing beyond just the areas where these brands were known. Boyd’s Coffee, for example, being an Oregon-based brand initially and then kind of growing through the West Coast. In the last year, we’ve really made a concerted effort to take that to the entire country.
And that’s one of the things we were celebrating in our last shareholder’s call. Boyd’s is now, for us, for the first time in its history, going to be offered nationwide and really pushing that out to consumers where in the East Coast throughout the Midwest they may not have known the Boyd’s brand before. Going forward, they will really have access to that brand.
Similarly, Farmer Brothers, in that more traditional tier, had really been a West Coast-based brand. It grew out of California and then started to find its way East. But because the company grew through a series of acquisitions, these brands were somewhat limited to the areas from which they came.
Other brands that had been acquired over the years were more prevalent in the Northeast or in the Southeast. But again, in the last year, we’ve made a concerted effort to distill down these various different brand expressions into just a few core brands so that for the first time in our history, we’ll be able to leverage our scale and the size of our network more appropriately.
So, I think Farmer Bros (NASDAQ:FARM) has really grown and been dynamic as these trends have developed.
And now what’s exciting for us, for the first time in our history, we’re able to actually bring the brands that we have in a more curated format to the areas all over the country that may not have seen these brands before.”
Farmer Bros has an increasingly profitable future according to John Moore.
“I think investors should know that the company is a solid company right now.
You know, we’ve just reported about $341 million in net sales.
We went through a transformational transaction just over a year ago that really refocused the company in a very healthy way, refocused the balance sheet, put us in a healthy trajectory to get back into our core business again, which has been DSD — direct store delivery — where we manage the relationship.
Our white glove service that we provide to our customers around the country is appreciated.
We have distribution centers around the country, a branch network that is very strong, about 80 branches that are spread from coast to coast.
We have about 250 routes of representatives that are out as the face of the company, providing a service that involves everything from managing inventory, rotating stock, calibrating machines, cleaning machines, making sure that the customers’ coffee program is on solid footing and represents the company.
Essentially, we enable our customers to realize the value and the coffee value proposition we provide.
In doing that, we’re not just a full solutions provider on the product side, but also on the equipment and service side.
We have a technician network that spans the country.
We’re served in all 49 contiguous states, and we’re providing both the equipment, the maintenance of the equipment, and the entire coffee solution set, inclusive of a comprehensive allied goods portfolio that is perfectly synergistic with the coffee day part, offering everything from pancake mix to biscuit mix, gravy, syrups, a wide array of products that are all supportive of that coffee-driven day part and that coffee business.
I think right now, people are excited to see that we’ve had five consecutive quarters of positive trajectory in cash flow generated from our operations.
People are excited to see that our margin structures and gross margin percentages are getting stronger and stronger over consecutive quarters and we’re really focused on the blocking and tackling that is going to push this company forward into the next fiscal year.”
Get the complete picture about coffee company Farmer Bros [ticker:FARM] by reading the entire interview with President and CEO John Moore, exclusively in the Wall Street Transcript.
Psychedelic drug stock picks are growing from the new legal medical mainstream and this professional stock analyst has a few for your 2024/2025 portfolio.
Expert analyst Patrick Trucchio has spent many years researching the psychedelic drug stock sector.
Mr. Trucchio has 17 years of experience on the sell side.
Patrick Trucchio, Managing Director of Equity Research at H.C. Wainwright & Co.
Prior to joining H.C. Wainwright, Mr. Trucchio was a senior equity research analyst at Berenberg Capital Markets (BCM) covering biotechnology and specialty pharmaceutical companies.
Prior to Berenberg Capital Markets, Mr. Trucchio worked at Wells Fargo Securities and BMO Capital Markets.
At Wells Fargo, Mr. Trucchio worked on an Institutional Investor ranked analyst team covering specialty pharmaceutical companies.
“On a formal basis, I’ve been involved in researching psychedelic drug development companies for the last six or so years, and informally, I’ve had a very good understanding of what’s been going on and the potential with psychedelics for, I would say, the last 20 years.
It’s really just an interest that I’ve had in how these mechanisms work.
It is a little more controversial, but how they work in ways that might create windows of opportunity for people to resolve what it is that’s bothering them, particularly if the problem is causing depression or anxiety…
These are companies that are looking to develop treatments through the formal FDA approval process, and would include SPRAVATO — esketamine — though would not include racemic ketamine, which is FDA-approved as an anesthetic.
Notably, ketamine is Schedule 3, and the other psychedelics are all Schedule 1, which means that they’re all technically illegal.
Typically, a novel or repurposed compound goes through the formal FDA approval process.
If the compound is Schedule I but demonstrates a medical use, as did EPIDIOLEX —cannabidiol — in epilepsy, and achieves FDA approval, there will be a time in which the drug sponsor will have to get their specific drug rescheduled by the DEA.
As mentioned, there’s precedent for that with EPIDIOLEX in epilepsy.
We’ll have to see exactly how that goes, but when I am talking about the psychedelics market, I’m talking about the drugs that are going through the formal FDA approval process, including generating preclinical data, as well as Phase I, Phase II, and Phase III data, followed by a New Drug Application submission and approval.
Our research does not cover areas such as psilocybin mushrooms that people are growing.
There are efforts to decriminalize these compounds in states like Oregon.
I don’t really consider that to be the same thing.
Ketamine is available.
It’s an anesthetic and it’s used throughout the United States on an off-label basis for depression at sub-anesthetic doses.
That means the FDA has not approved its use for depression at lower doses.
So, sub-anesthetic doses are administered for people who are looking to get their depression treated.”
Psychedelic drug development has not been a smooth path for researchers or publicly traded drug development companies.
“…In June 2021, we hosted our first neurology conference, and we had so much interest.
It was the first sell-side-organized, big psychedelic-focused conference, to my knowledge, focused on second-generation psychedelics that are being developed for mood disorders, including depression or anxiety, and we had an enormous amount of attendance — more than 300 institutional investors.
The final keynote speaker that year was Rick Doblin, who is one of the founders of MAPS, or what has become Lykos, which is evaluating MDMA-assisted therapy in PTSD.
It was virtual.
We had more than 700 attendees, and that is a very large number for a virtual keynote address.
Around that time, while many of the questions focused on the investment merits of the companies that were emerging in the space, we fielded as many if not more questions around the potential health benefits of psychedelic use.
For example, a lot of questions being asked were like, can I take a psychedelic to make me smarter, or will it help me in my role in some way, will it help me think about things differently? In other words, will it give me an edge in what I’m doing?
These types of questions are outside the scope of our role, which is focused on evaluating the investment merits of the public companies in our coverage universe.
However, I do believe that the questions around health benefits of psychedelics have helped the microdosing trend really take hold.
There’s a couple of important things there.
First is that there’s no evidence that microdosing does anything in any way for any disease.
Second, Mind Medicine ran a study with microdosing for ADHD, and they decided not to go forward with the program.
They didn’t release what that data looked like, but I think we can conclude it didn’t look great.
Also, there was a study out of Imperial College London that looked at microdosing in ADHD specifically.
I don’t know that they’ve released those results, but in conversations that we had, it sounded as if it was more disappointing.”
Psychedelic drug stocks are getting attention from the popular “micro dosing” concept but this may lead to an FDA dead end.
“…The classic psychedelics have activity at a receptor called 5-HT2B, which is present in cardiac tissue and it’s known that this activity can lead to or contribute to valvular heart disease.
So, as we think about what the industry wants to promote, is that helpful in any way?
I don’t think it’s helpful, and none of the companies that we cover are in any way promoting that.
I think it was happening more in pop culture.
You might have had some of these people on podcasts and things like that saying, “I microdose with LSD, and it helps me. I’m so much more productive.”
The interesting thing is with something like ADHD, and for sure with depression and anxiety, there’s a very significant placebo effect.
That’s why it’s hard to get drugs approved in these disease areas, because the FDA wants to see that a drug is actually doing what it’s intended to do.
The short answer is, I think it has an impact just in terms of increasing interest in the space at large.
It’s not really going to have an impact as far as how these drugs are administered because the way these drugs are being researched is actually not as a microdose, but as what’s called a macrodose or a perceptual dose where it’s administered maybe once or twice a year, or four times a year in some cases for the longer-duration psychedelics.
For the shorter duration ones, like DMT, 5-MeO-DMT, where maybe the drug effect lasts like 20 to 45 minutes, possibly those will be administered more frequently, perhaps monthly.
And then you have something like SPRAVATO.
At the start of treatment, patients could be receiving SPRAVATO a few times a week and the intervals lengthen after that, but it’s a bit complicated. None of them are being administered as a microdose.
The FDA also released their guidance for drug makers in June 2023 that detailed the potential for valvular heart disease to be triggered by the 5-HT2B agonism and basically saying that we want to see the research that’s been done.
If the drug is going to be a daily microdose, the FDA would require some sort of cardiotoxicity data to be conducted.
And then for these drugs, it’s different just in terms of how they’re being administered.
The impact is just in terms of increasing the interest overall, and in some ways that’s helpful, in other ways, it may not be as helpful.”
Patrick Trucchio does have his top picks in the psychedelic stock market.
“Focusing on the names that have readouts coming within the next year, if we had to pick three, COMPASS Pathways would be our top pick. That’s because they have two Phase III readouts coming. One is expected in December or January and then one in the middle of 2025.
After COMPASS, GH Research also has a Phase IIb trial reading out on GH001. And then ATAI Life Sciences has a Phase IIb readout coming on BPL-003. Those are near-term, later stage data readouts for those three.
It’s going to be a little bit of time for Cybin and Mind Medicine for their Phase III trials in depression and anxiety before we have data. That’s the only reason I don’t have those two in the top three.”
Get the complete interview with Patrick Trucchio, Managing Director of Equity Research at H.C. Wainwright & Co., exclusively at the Wall Street Transcript.
The CEO at OSE Immunotherapeutics (EPA:OSE) has an important contribution to the development of a cure for cancer.
“The lead compound or the lead program is a therapeutic cancer vaccine, meaning we use the technology of therapeutics vaccination to educate our immune system to recognize and kill cancer cells.
This program is now in Phase III pivotal trial in Europe, the U.S., Canada and the U.K. — there are 14 different countries involved.
We just got the green light from the FDA early this year, and recently we announced approval of the protocol in Europe.
This is maybe the most advanced therapeutic cancer vaccine already having positive data in the previous randomized trial in non-small cell lung cancer.
Non-small cell lung cancer is the second most common cancer.
Unfortunately, it’s 2 million people every year, the highest in terms of mortality.
So, there is a very high medical need, as you probably know, when the patients do not respond or lose response to the classic treatments, either chemotherapy or immunotherapy.
There is no treatment option registered so far.
And so, we are leading the space here where we explore the therapeutics vaccine in monotherapy in comparison to chemotherapy in metastatic patients, so very advanced cancer patients.
This is all for the first program.
The second program is a classic immunotherapy, and the technology is a monoclonal antibody — it’s a very classic technology now in the pharma world.
And we just this summer announced a positive readout, meaning positive efficacy results in inflammatory bowel disease, in particular, in ulcerative colitis.
Here again, it’s a very big market, IBD.
The inflammatory bowel market is a market of $25 billion in the next two or three years.
And just ulcerative colitis, which is one of the two big diseases in this area.
It’s more than 3 million patients every year in the developed countries.
It’s even more than lung cancer patients.
There is a very high medical need.
And so, we are really happy now with this positive result with a new antibody named lusvertikimab, where we were able to demonstrate that this molecule is efficient for patients.
And now, we are thinking of strategy for the next steps, how to move forward in this area where there is a lot of investment appetite from the large pharma companies.”
Nicolas Poirier is the CEO at OSE Immunotherapeutics.
Nicolas Poirier, CEO, OSE Immunotherapeutics
He has been Chief Scientific Director and member of the management team of OSE Immunotherapeutics since 2016.
He started his career at Tcl Pharma in 2009 as a researcher, became Project Manager at Effimune in 2012, then Director of R&D programs in 2014.
In addition, Mr. Poirier is an active member of the Strategic and Scientific Advisory Committee (COSSF) of the French biomedical industry association (MabDesign).
Over the past 15 years, he has authored more than 50 peer-reviewed international scientific publications and holds over 40 issued patents in the field of immunotherapy.
Mr. Poirier and his team have obtained more than 45 million euros in French and European public funding to co-finance OSE Immunotherapeutics’ research and development programs.
He holds a Ph.D. in immunology from the European Center for Transplantation and Immunotherapy Sciences, Nantes, masters’ degrees both in biotechnology from the University of Nantes and pharmacology from the University of Louis Pasteur in Strasbourg, and a certification in global management from INSEAD.
OSE Immunotherapeutics also has created many strategic partnerships with larger pharmaceutical companies.
“AbbVie is really the first pharma in this market.
And we have licensed our patents for a new immunotherapy targeting chronic inflammation — it could be in the gut, in the lung, dermatology, and so on.
And so now this program will move into clinics with AbbVie, and we will pursue this program with them.
It’s a really important deal for us.
It’s a deal over $700 million in terms of upfront, plus future milestones, as well as tiered royalties.
And we received a $48 million upfront for preclinical compounds before entering in patients, which is quite high if we look at the benchmark.
So, this is a really important and strategic partnership for us.
We also have a second partnership with Boehringer Ingelheim, another pharma based in Germany, more for the oncology or cardio metabolic space or disease.
We also reaffirmed this partnership early this year.
We were paid more than EUR38 million during the extension of this partnership.
And they are conducting efficacy studies, Phase Ib studies in solid tumors, particularly in head and neck, as well as in Phase II in cardio-renal-metabolic diseases.
And finally, in this pillar, we also have a third partnership in the U.S., Veloxis, which is a company dedicated to transplant patients.
They already have one product registered in transplantation, and they’re evaluating one of our innovations in Phase II in kidney transplant patients.
In terms of the contracts, these three partnerships together are more than potentially $2 billion.
And we received more than EUR200 million in the last eight years.
So, it’s really significant for us.
It represents 80% of how we are financing the company.
We raised a little bit of equity on the public market, but the majority of our financing came from these large pharma deals.”
The biotech based in France has some interesting management issues because of its history.
“We’re a French company, so we are managed maybe differently from the U.S.
Let’s say we’re not a big biotech, we’re around 70-plus employees, nearly half in research, which illustrates that we are maybe very different from biotechs, where there is initially a big investment in the research phase and then they stop after having one or two compounds or programs and move to the development and clinical stage.
We continue to invest a lot in our research and innovations because we have a very good R&D engine that is highly productive and generates this new partnership with pharma.
And also, because in our DNA we are working for the patients, and we are fully aware that there will not be one or two magic bullets that will cure everybody.
We need to constantly innovate.
So, this is our DNA.
But on the other side, you may understand that we are leading the space on cancer vaccine technology.
We are launching a pivotal registration trial worldwide.
It’s North America and Europe.
It’s a very different culture, very different expertise and people.
And we have to manage a small company with these two extremes, from research to late-stage development.
I don’t know how we are doing that, but it is working quite well.”
Get the complete picture of this cancer vaccine company by reading the entire interview with Nicolas Poirier, the CEO at OSE Immunotherapeutics, exclusively in the Wall Street Transcript.
