The Rise and Fall of the Metal Market

Many investors look at gold as a safe bet, an insurance policy for times when other stocks are less certain. In this year an ounce of gold has increased in value by almost 13%, to $1,296. There are two schools of thought about why the commodity has experienced such a high level of growth after having been uneasy in the first part of this year. The first is that this increase comes off the back of political unrest. As political tensions grow both in the US, with continuing problems among the Trump administration, and in the UK, with the recent attacks as well as the general election, some believe that these could begin to affect the economy, and upend corporate profit growth. Gold is a stable way for investors to hedge their bets against this possibility.

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Another idea is that, rather than gold prices being increased as a result of politics, the rise could be linked more to the state of the economy and monetary policy. The US dollar is currently near a seven-month low compared to other world currencies and it has been observed on several past occasions that as the dollar falters the price of gold rises. Others believe that recent rise and fall in gold price is seasonal, with Frank Holmes, CEO and Chief Investment Officer of US Global Investors saying that there is a 60-70 % chance that the price of gold will experience a general upward trend between June 2017 and January of next year.

While gold may be a safe bet in its current state there are also other metal commodities worth following. As the demand for electric vehicles continues to grow, so will the demand for both lithium for batteries and copper for wiring, making these possible safe and lucrative investment options.

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The auto industry is also responsible for an upward trend in the price of palladium, a crucial component of catalytic converters. After having sunk to $657.50 per ounce in December 2016 the precious metal has risen by 24% in 2017 to a current price of $856.60. However, while it has regained its ground having been near a seven-year low since January, there are concerns that palladium may not be able to maintain this as there is a slowing in car sales in the US, Europe, and China. In the US car sales fell again in May, contributing to a consecutive five month decline, while in the EU, although sales rose by 4.7% in the first four months of 2017, they then dropped by 6.6% in April. Other countries have, however, experienced continued growth in auto sales, such as Canada whose sales increased by 11% in May. The result is divided opinion on the future of palladium, with some believing that it has reached its peak and others of the opinion that it will hold its ground and possibly even continue to appreciate in price.

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Surge of the Social Media Sector

With the rise of a generation that spends a large portion on its time online, it is no wonder that many social media companies are experiencing significant growth. Furthermore, that the status of longer-established platforms are being threatened as new platforms are developed.

Following a multi-year fall, Twitter shares are up 26% in the last month. This unexpected growth has been accredited to deals that Twitter has made with media companies to stream video content from the Twitter app. These deals include the rights to stream various National Football League (NFL) content, though not the 10 Thursday Night NFL games it had the rights to last year, and which it missed out on this year to Amazon. As these deals come into play it awaits to be seen if Twitter can maintain this recent growth or if it will return to the recent pattern of decline.

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The long-standing social media platform, Facebook, has managed to maintain its high-ranking position, even as other social medias are developed that could rival it. The network, which has 1.86 billion monthly users, and also owns big-name platforms Instagram and WhatsApp, has seen its stocks grow by 25% over the past 12 months. Although Facebook has seen a slight slowing down in advertising recently, it still holds the position as the second largest display ad company in the world, after Alphabet’s Google. Analysts estimate yearly growth of 37% and 28% in revenue and earnings respectively as the company introduces new advertising products, increases its use of video advertising and increases user numbers.

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Another platform which can attribute its recent growth, in part, to advertising revenue and the development of new video hosting technologies is the Chinese social network Weibo. With annual growth of 43% annually to $212 million last quarter and monthly active users (MAU) increasing by 33% to 313 million the microblogging network is growing rapidly. Wall Street analysts predict that this year Weibo will see a revenue increase of 51% and that its non-GAAP earnings with rise by 62%.

A proliferation of dating sites have sprung up in recent year and platforms such as Tinder, Match.com, OKCupid, and PlentyOfFish are all under the umbrella of Match Group. In the last quarter this company saw 92% of its revenue come from Match.com and Tinder, which now has over 50 million users. While often these platforms are free, Match Group has managed to increase revenue by creating premium options, where users can pay for extra features. Last quarter paid member count rose to 5.7 million network-wide, an annual increase of 23%. This boosted total revenue by 20% and increased earnings by 21%.

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While the outlook of these companies is overall positive in the short term, maintained growth is not a sure thing. As competition in the social media sector increases companies will have to continue to develop and innovate in order to stay relevant and experience positive growth.

(Please note: James O’Leary does not currently hold a position in Twitter or Match Group. Henry James International does not currently own a position in Twitter or Match Group for any client portfolios. James O’Leary does currently hold a position in Facebook and Weibo. Henry James International does not currently own a position in Facebook and Weibo).).

All content in this blog represents the opinion of James O’Leary

Digital Developments – The Wearable Technology Market

Developments in the digital era have meant that it is easier than ever before to take your work with you. Phones now serve not only for making calls but also as devices for sending emails, keeping up-to-date with world news, and keeping track of to-do lists and calendar engagements. One digital sector that has seen growing interest recently is that of wearable technology. Wearable tech has been around in one form or another for centuries, but a boom in popularity began in the 2000s when companies began developing devices that took keeping fit on the go to a whole new level. Since then the wearable technology sector has taken off, with the number of wearable tech devices being shipped increasing from 29 million units in 2015 to 33.9 million units in 2016, growth of 16.9% year-on-year.

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Having launched their first product in 2008, a fitness tracker wristband, Fitbit initially experienced high levels of commercial success. However, recent figures show that the company may now be in a period of declining consumer interest. Shipments in the 4th quarter of 2016 were down 22.7% compared to the same period of 2015, with numbers dropping from 8.4 million units to 6.5 million. In terms of market-wide success, in the first quarter of 2017 Fitbit accounted for 13.2% of all wearable technologies shipped, in comparison to the 24.7% of the market that it made up a year ago. It is thought that the drop in Fitbit products may be due to a reducing demand for fitness bands and the company’s slow entry into the market for smartwatches. However, CEO of the company, James Park, believes that as the market for wearable technology develops, new opportunities for renewed growth of Fitbit will present themselves.

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As Fitbit sales decrease, the way has cleared for other big-name tech companies to take a larger portion of the market. With the launch of the new Apple Watch series 2 in September 2016, Apple has seen an increase in sales from 4.1 million to 4.6 million, a growth of 13%. The company has overtaken Fitbit as number one in the wearables market in the first quarter of this year. Close behind Apple, Chinese technology company Xiaomi has also overtaken Fitbit to second place in the market. Indeed the company has been the fastest growing in the industry, experiencing a year-on-year increase of 96.2% in sales, from 2.6 million to 5.2 million from 2015 to 2016. Much of this growth was due to shipments of their tracker, Mi Band Plus.

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While Fitbit may be experiencing a period of declining interest, the wearable technology market as a whole is bigger than ever, and with new products constantly being developed and introduced it is likely that interest in this sector will continue to grow.

(Please note: James O’Leary does not currently hold a position in Fitbit, Apple, or Xiaomi. Henry James International does not currently own a position in Firbit, Apple, or Xiaomi for any client portfolios)

Positive Developments in the Biotechnology Market

*All content in this biotechnology blog represents the opinion of James O’Leary*

In recent weeks the biotechnology market has seen great changes, with the development of new medicines and medical software. The outcome has been an increase in interest in various companies and, by extension, an increase in the stock prices of these companies.

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A large market is developing for drugs that fight cancer through using the body’s own immune system. Incyte has developed a medicine, called Epacadostat, which does that and which has caused quite a stir among investors and some of the biggest drug makers in the world. The exciting development of this new drug has resulted in Incyte shares increasing in value by 76% in the last year, while revenue has jumped from just $1.1 billion to $28 billion in the same time period. In 2017 alone Incyte stock has increased 36% in value, making it one of the S&P 500 best performers of 2017 within the drug sector.

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(Please note: James O’Leary does not currently hold a position in Incyte. Henry James International does not currently own a position in Incyte for any client portfolios).

Invitae

Also making recent waves in biotech news is Invitae who have announced that they are launching a platform on which patients will be able to anonymously upload their genetic information, initially focusing on the information of cancer-related patients. The idea behind the development of this database is that more readily available data will allow developers to make bigger advancements towards important medical discoveries. Following the announcement of this new platform, Invitae’s shares increased in price by 2.79%, closing on the 6th at $11.05, while year-to-date the company stock has experienced a gradual rise of 39.17%.

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(Please note: James O’Leary does not currently hold a position in Invitae. Henry James International does not currently own a position in Invitae for any client portfolios).

Neurocrine Biosciences

The first product for treating the movement disorder Tardive Dyskinesia (TD) in adults has been developed by the company Neurocrine Biosciences. The announcement that the drug, Ingrezza, has been FDA approved was followed by a sudden 22% jump in Neurocrine stock prices, which closed at 24% on Wednesday 12th. At close on the same day Neurocrine’s shares were up 33% on a year-to-date basis.

(Please note: James O’Leary does not currently hold a position in Neurocrine Biosciences. Henry James International does not currently own a position in Neurocrine Biosciences for any client portfolios).

Other News in the Biotechnology Sector

Similar increases in other biotechnology companies have also been observed, according to Barrons, with iShares Nasdaq Biotechnology (IBB) shares having climbed 0.34%, Vertex Pharmaceuticals (VRTX) lifting 2.42% to $177, and Healthcare stocks increasing by 0.24%. Three companies in the biotech sector that investors should keep an eye on are Biogen (BIIB), Alexion (ALXN) and Gilead (GILD). Biotech Research Analyst Alethia Young from Credit Suisse has estimated that BIIB will report earnings per share (EPS) of $5.14 instead of the $5.02 that the consensus predicts, while revenue will be $2.79 billion rather than the average estimate of $2.75 billion. Likewise Young believes that EPS and revenue for GILD will be higher than consensus estimates, with $2.46 instead of $2.28, and $6.94 billion over $6.6 billion respectively. As for ALXN, it is predicted that it will meet expectations throughout the year, if not slightly exceed them.

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Several biotechnology companies have seen increases in stock value as they have announced new developments and, according to Christopher Raymond, Senior Biotech Analyst and Managing Director of Raymond James, the commercial outlook for biotechnology is on the whole positive for 2017.

(Please note: James O’Leary does not currently hold a position in any of the companies mentioned above. Henry James International does not currently own a position in any of the aforementioned companies for any client portfolios).