Understanding Last Month’s Nobel-Worthy Breakthroughs

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We’ve forgotten how hard it was to build modern healthcare.

In 1900, pneumonia, tuberculosis, and diarrheal diseases were the three leading causes of death in America. Staphylococcus aureus in the bloodstream killed 82% of the people who got it and most of them were young and healthy. Even as late as 1935, maternal mortality was still 600 per 10,000 live births.

Then, penicillin emerged – as an accident. A mold spore drifted onto a culture plate in Alexander Fleming’s London laboratory in 1928. It killed the bacteria growing there. And, unbelievably, it was safe enough to be dosed into humans. Out of all the world’s innovations and technologies, only synthetic nitrogen fertilizer has enabled more human life than the discovery of antibiotics.

By 1950, maternal mortality had fallen to 100 women per 10,000 live births. Today, it’s between 10 and 20.

In 1900, 40% of the deaths from pneumonia were children under five. Today, only the very old and the very sick die from pneumonia. And, overall, less than 3% of all deaths in America are attributable to the leading causes of death in 1900.

But these innovations were not easy.

Modern drug discovery began at Rutgers University in the late 1930s. Professor Selman Waksman (pictured right, below) set out to discover new antibiotics with a systematic approach. His method was witchcraft crude by today’s standards. He dug up soil samples, cultured whatever was growing in it, and then painstakingly tested every culture against live bacteria, until something worked. It was like a blind man searching for a needle in 10,000 haystacks.

But it was foolproof. A student streaked a soil microbe in a line down the middle of a plate. Then he streaked a disease bacterium across that line at a right angle. If the microbes in the soil were producing something effective at killing bacteria, it left a clear band through the bacterial streak. About 1,000 of Waksman’s 10,000 soil cultures produced a clear band. But that didn’t mean he discovered 1,000 new antibiotics. This was only the first hurdle.

Nearly every antibiotic he discovered came out of actinomycetes: the thread-like soil bacteria that produce the smell of fresh-turned dirt. One actinomycete in 10 makes the same compound, streptothricin. Waksman isolated it, tested it, and discovered it was toxic.

And then there was another problem: many of the compounds he discovered killed the wrong type of bacteria. As you probably know, bacteria come in two forms: gram-positive and gram-negative. Gram-positive bacteria have a thick cell wall that’s “naked.” Gram-negative bacteria have a thin cell wall that’s protected by a membrane.

Penicillin works by jamming the enzyme that builds the cell wall, which causes the cell to burst as it grows. Against bacteria with a thick bare wall (gram-positive) the drug is devastating. But against a gram-negative bacterium, it never reaches the wall at all: the outer membrane protects it. Plague, cholera, and typhoid are gram-negative – penicillin did nothing to them. What Waksman needed was a compound that could kill what penicillin couldn’t. He needed to find a compound that could destroy gram-negative bacteria.

And then there was a final problem. Some of the gram-negative killing compounds could not be manufactured. Producing an antibiotic in quantity means growing the microbe in thousands of gallons of liquid inside a steel tank. Plenty of microbes that secrete freely across a solid plate will not secrete anything once they are submerged.

Out of 10,000 cultures, roughly 100 survived all of these challenges. Then they all had to be isolated. That meant separating the one active molecule out of the soup the microbe grew in, purifying it, and then making enough of it to inject into an animal. That took the sorting from 100 down to only 10.

Then the animals they were testing these new antibiotics on kept dying. In 1940, actinomycin, the first antibiotic the program found, was the most powerful anyone had ever measured. But just one milligram of it killed a full-grown chicken. Streptothricin passed its early animal tests and then destroyed kidneys weeks after the dose. Clavacin and fumigacin failed the same way.

Waksman discovered that, relatively speaking, killing bacteria wasn’t that hard. Killing bacteria at a dose the patient can survive was vastly harder. But finally, one of Waksman’s researchers found one.

Albert Schatz, a 23-year-old graduate student working alone in the basement at Rutgers, isolated streptomycin on the afternoon of October 19, 1943. It cured tuberculosis, a deadly disease that had killed millions. The discovery won Waksman the Nobel Prize in 1952.

Diminishing Returns On Drug Research

Over the following decade, researchers in his laboratory worked through more than 100,000 more cultures. But instead of improving with time, his lab discovered fewer new compounds, even as it spent more money on discovery. Economists call the problem Eroom’s Law, which is Moore’s Law spelled backward. Just as Moore’s Law held that computer chip speed doubled every two years, Eroom’s Law holds that the number of new drugs approved per billion dollars of research spending has been cut in half roughly every nine years since 1950. In the early 1950s, an inflation-adjusted billion dollars of research bought 40 to 50 approved medicines. By 2018, that same billion bought 0.7.

Today, the Tufts Center For The Study Of Drug Development puts the all-in cost of one approved drug at $2.6 billion. Where does all the money go? It goes toward the overwhelming percentage of drugs that fail.

That’s why the drug business has always been organized around diversifying the risks as much as possible. But that’s finally changing.

In much the same way that technology converted the oil-and-gas industry from a discovery challenge to an engineering challenge, with enormous horizontal wells, technology is changing the essential challenge of medicine from discovery to manufacturing.

For a century, the oil business ran on the same odds as when Waksman’s antibiotics were discovered. Until the late 1970s, the industry considered a 10% wildcat success rate attractive: one successful well for every nine dry holes. The American Association of Petroleum Geologists tracked it by decade. New-field wildcat success ran 11.3% from 1946 to 1955, 10.8% from 1956 to 1965, and 11.2% from 1966 to 1975.

Thirty years, and no improvement at all.

Then, the industry discovered three-dimensional seismic surveying. This technology bounces sound waves off rock layers and reconstructs the subsurface inside a computer. It first emerged in the 1980s and became standard practice by the 1990s. Amoco measured the difference. Between 1990 and 1996, wells drilled with 3D seismic hit 49% of the time, against 14% for wells drilled without it. Over those same years, the share of Amoco’s prospects covered by 3D rose from 1% to 65%, and its cost of finding a barrel of oil fell dramatically – from $8 to less than $1.

And what came next made it virtually impossible to drill a dry hole.

Texas real estate developer George Mitchell spent 17 years and roughly a quarter of a billion dollars drilling the Barnett Shale in North Texas without turning a profit. In 1997, one of his engineers, Nick Steinsberger, replaced the expensive gel in the well’s fracturing fluid with water slickened by a trace of chemicals. The following year that well, S.H. Griffin No. 3, out-produced every well the company had ever drilled.

Mitchell did not discover where the gas was. Everybody already knew where the shale was: it covered thousands of square miles. What Mitchell proved was, with the right chemistry, gas could be manufactured out of that rock.

That’s what I mean when I say that drilling stopped being exploration and became engineering. Today the challenge isn’t finding oil and gas. Development wells in proven shale succeed 85% to 95% of the time. Today the challenge is purely engineering: how efficiently can you drill a given area of shale?

In 2010, the horizontal section of the average new Permian Basin well ran 3,870 feet. By 2025, it ran 10,867 feet and 15% of new wells now stretch past three miles. Occidental Petroleum (OXY) cut its drilling time in the Wolfcamp shale (within the Permian in West Texas) from 43 days per well in 2014 to 26 days in 2015, and the best operators now drill these wells in 13 days. Output per Permian rig went from 130 barrels a day in 2014 to 800 barrels a day by 2019.

Nobody found more oil. They engineered more oil.

Drug discovery is making that same turn right now. Artificial intelligence (“AI”) will play a growing role in testing new drug targets. Much like 3D seismic, AI will dramatically reduce the cost of discovery. The key to success in the drug business will be engineering – figuring out more efficient, more effective, and cheaper ways of hitting the best targets.

Our portfolio will be built around who owns the best engineering.

Chronicling The Remarkable Breakthroughs

As you know, our strategy in Porter & Co. Biotechnology is always to follow the science.

In the month of August, there were two Nobel Prize-worthy technological breakthroughs that I’d like to share with you.

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The most important breakthrough was on August 19. Merck (MRK) and Moderna (MRNA) announced a seminal breakthrough in the treatment of solid cancer tumors, the first successful Phase III trial of an individualized mRNA cancer vaccine. This new class of medicine holds the promise of stopping solid tumors from metastasizing following surgical removal.

Six days earlier, the New England Journal of Medicine published the details of a successful application of gene editing, in which a single infusion permanently rewrote the genetic code of human liver cells. The result dropped patient LDL levels by 62%, permanently.

The point made by highlighting these discoveries – which you’ll see me driving home in Biotechnology – is that we are living through a period of profound medical innovation. We’re getting closer to delivering cures at the cellular level by simply rewriting DNA – stopping disease before it can even begin.

And today, no one in the world understands the engineering behind drug discovery and optimization better than Eli Lilly (NYSE: LLY).

Yes, I know that’s a major pharmaceutical company. But we follow the science. Here’s what I mean.

The successful gene-editing program that I described above, the one that permanently reduced LDL in patients, is owned by Verve Therapeutics. Harvard cardiologist and human geneticist Skar Kathiresan founded Verve because his brother died of a heart attack at 42. Kathiresan founded the company to stop treating heart disease as a chronic condition by installing the natural protective mutations that nature already gives some people. In other words, rewrite the code of life inside your cells to give you nature’s best protection from heart disease. Obviously, the potential value of this technology is enormous, and it could have many applications beyond cardiology.

Verve’s initial funding came from Alphabet (GOOG) in May 2019. It went public in June 2021, during the massive post-COVID tech stock boom. On its first day, it gained 68%.

The company has three main programs. The breakthrough program that just published its results is VERVE-102, which is targeting PCSK9 for LDL cholesterol. It has Food And Drug Administration (“FDA”) Fast Track designation and is very promising.

The company’s next program is called VERVE-201. It’s targeting another gene in the liver (ANGPTL3) that makes a protein whose job is to put the brakes on fat clearance. It inhibits two enzymes (lipoprotein lipase and endothelial lipase) that pull triglycerides and cholesterol out of the bloodstream. Silence that gene, the brakes come off, and blood fats clear faster. It is unusual in that it moves all three lipid measures (LDL, triglycerides, and HDL).

Again, the company knew to target this particular gene because people who naturally have one broken copy of ANGPTL3 have 17% lower triglycerides, 12% lower LDL, and 34% lower odds of coronary artery disease. People with two broken copies of this gene have a recessive condition called familial combined hypolipidemia – very low triglycerides, LDL, and HDL – and they are healthy. Losing this gene entirely costs you nothing but gives you much better cardio health.

And then there’s VERVE-301, which targets lipoprotein(a) – Lp(a) – which I wrote about last month. This is the largest potential target in all of cardiology.

So what does this have to do with Eli Lilly? Lilly is the best in the world at finding the best targets and building the best therapeutics. In June 2023, Lilly signed a global research collaboration with Verve on its pre-clinical Lp(a) gene-editing program, paying $60 million upfront. After the results of VERVE-102 (targeting PCSK9) were first published last spring, Lilly bought Verve Therapeutics for $1 billion. That was $10.50 per share, which was less than the initial public offering (“IPO”) price and about 86% below the stock’s all-time closing high of $73.99 (set September 10, 2021).

Ruth Gimeno, Lilly’s group vice president for diabetes and metabolic research and development, described the deal as a chance to “shift the treatment paradigm for cardiovascular disease from chronic care to one-and-done treatment.”

This is more than just another modality. This is the difference between a treatment and a cure, and it could profoundly reshape the entire drug industry. I’ve told you that I believe gene silencing will be the best-performing modality over the next 20 years. But what if there aren’t any genes to silence because they’ve all been edited away?

Here are three points about that…

1. Gene silencing will be used for a long time because changing your DNA permanently carries a lot of unknowns, and it may be irreversible. An edited genome has no off switch and no antidote. There will be a lot of people who are more comfortable taking a therapy once or twice a year – knowing that if something changes, they can always change therapies.
2. Dosing has value too. A physician titrates silencing: more drug suppresses more protein, less drug suppresses less, and the dose can be adjusted as the patient changes. An edit delivers whatever suppression the editing efficiency achieved, forever. Where the safe range is narrow, or where medicine wants to reduce a protein rather than eliminate it, the adjustable drug wins.
3. And then there’s the financial question. Insurers know how to pay for a twice-yearly injection, because they pay for thousands of chronic drugs that way. A one-time cure demands a single enormous payment with no established mechanism for spreading that cost across the decades of benefit it delivers. That is precisely why gene therapy has been such a commercial disappointment so far. BioMarin Pharmaceutical (BMRN) pulled a hemophilia gene therapy off the market entirely, despite the drug working because nobody would pay for it.

And regulators discriminate too. An irreversible intervention requires longer follow-up, mandatory patient registries, and restrictions confining early use to the sickest patients. For a 45-year-old managing a chronic condition, the reversible drug clears approval faster and reaches the prescription pad sooner.

Cholesterol treatment already works exactly this way. Statins come as daily pills. Antibodies against PCSK9 are injected twice monthly. Alnylam Pharmaceuticals (Nasdaq: ALNY) and Novartis’ (NYSE: NVS) Inclisiran (Leqvio) silences PCSK9 twice a year. And Verve’s gene-editing technology can rewrite it away once. Four technologies, one disease, and the market will determine who gets these drugs by how sick the patient is, how old, how reliably they take medication, and who is paying.

In other words, I don’t think gene editing is as big a risk to gene silencing as gene silencing is a risk to other modalities. I believe, going forward, more disease is going to be treated at the cellular level by silencing genes or editing them.

There’s no question that Lilly will be a leader in this field. And yes, I know its shares trade for more than $1,000 and the company’s enterprise value is more than $1 trillion. But that’s cheap compared to what the company will earn over the next decade.

Specifically, today you’re paying 25.5x what analysts expect Lilly to earn next year. Consensus estimates put earnings at $36.39 per share this year and $46.62 next year, on revenue climbing from $88.3 billion to $101.8 billion. And I believe revenue growth will far surpass these estimates.

The reason isn’t gene editing. Or even the company’s weight loss shots. The reason is a pill that’s going to transform human health.

Eli Lilly Is Medicine’s Nvidia

Novo Nordisk’s (NVO) Ozempic and Wegovy and Lilly’s Mounjaro and Zepbound are the current best-selling weight-loss shots. These therapies are peptides: a short chain of amino acids. Chemists build them the way a jeweler strings a necklace together. They anchor the first amino acid to a plastic bead, couple the second amino acid onto it, chemically unmask the new end so a third can attach, wash the bead in solvent, and repeat.

Tirzepatide, the molecule inside Mounjaro and Zepbound, runs 39 amino acids long. Every link demands its own coupling, unmasking, and washing cycle. Then there’s a purification process, which pushes dilute liquid through columns the size of oil drums for days. It’s a chemical engineering marvel. It is also expensive.

But orforglipron, Eli Lilly’s weight-loss pill, isn’t a peptide. It’s a small molecule.

Chemists make this drug the way they make aspirin or the cholesterol drug Lipitor: a handful of reactions, solid crystals you can filter and weigh at each stage, and purification by crystallization instead of chromatography. Thus, small molecule drugs are vastly cheaper to make than peptide chains.

The industry measures what a process costs to run using process mass intensity (“PMI”). Weigh everything you feed into the manufacturing line, the reagents, solvents, water, all of it, and divide by the weight of finished drug that comes out the other end. PMI captures manufacturing cost better than any other single number because solvent purchase and solvent disposal, not raw ingredients, dominate the bill. The American Chemical Society’s Green Chemistry Institute collected real production data from 14 pharmaceutical companies across 40 peptide manufacturing processes. Peptides consume 13,063 kilograms of input for every kilogram of drug delivered. Small molecules consume roughly 200.

Solvent accounts for roughly 44% of that mass. It’s expensive and frequently toxic. One solvent, dimethylformamide, generates 39% of all the waste. European regulators classified dimethylformamide as a Substance of Very High Concern and restricted it in December 2021 over reproductive toxicity. Piperidine, the reagent that unmasks each link on a peptide chain, sits on the Drug Enforcement Administration’s controlled-chemical list. Peptide plants have enormous compliance costs.

Over time, chemical engineers can drive costs out of small-molecule production. That’s why generic pills cost pennies. But peptide manufacturing shows no such expense-curve improvement between early development and commercial scale. It doesn’t get easier to make at scale.

The weight-loss market won’t be won by finding a better target. Incretins (GLP-1s) are incredibly safe and effective. The weight-loss market will be won by producing and marketing enormous quantities of these drugs at vastly lower costs. Much like a shale field, this market is not about discovery. It is an engineering battle. And Lilly has won.

I predict that Eli Lilly’s pill won’t just garner a lot of the market. I expect it will garner virtually all the market, better than 90% share over the next decade, for one simple reason: it’s vastly cheaper to produce and to distribute.

But wait a minute, Porter, wasn’t Novo Nordisk first to market with a GLP-1 pill?

Yes, Novo got there first. But it did it by manufacturing its peptide into a pill. That isn’t easy to do. It’s also very expensive because, in pill form, it requires vastly more of the GLP-1 peptide, semaglutide. And that’s an important point.

Bioavailability measures the fraction of a swallowed dose that survives the stomach and intestine and arrives in the bloodstream intact. Stomach acid and digestive enzymes exist specifically to dismantle proteins into their component amino acids, and a peptide is a small protein. Thus, your stomach treats oral semaglutide as lunch.

The FDA measured oral semaglutide’s bioavailability two separate ways during its review and got 0.471% and 0.795%. Swallow 1,000 units of oral semaglutide, and only five to eight of them reach your bloodstream, while the gut destroys or expels the other 992. In other words, Novo’s pill is an extremely inefficient delivery vehicle.

Novo tried to engineer a solution. Every tablet of Rybelsus, Novo’s original semaglutide pill, carries 300 milligrams of an absorption enhancer called salcaprozate sodium, which raises the pH immediately around the tablet so the peptide slips across the stomach lining before enzymes reach it. But there’s a problem: absorption still collapses under ordinary conditions. In the food-effect study Novo filed with the FDA, 14 of 26 subjects who swallowed the tablet after a meal showed no measurable semaglutide in their blood at all. None. The label therefore instructs patients to dose on an empty stomach, with no more than 120 milliliters of plain water, and to eat, drink, or take nothing else for at least 30 minutes.

Good luck in the real world.

Injected Wegovy delivers 2.4 milligrams once weekly, which is about 10.3 milligrams of semaglutide per patient per month. The approved Wegovy pill delivers 25 milligrams every day. Call it 750 milligrams a month. Switch a patient from the Wegovy injection to the Wegovy pill, and that patient consumes 73x more semaglutide than they did on the shot, whether any of it reaches their bloodstream or not. Every additional milligram must come out of the same peptide plants that took Novo five years and $10 billion a year to build. Now think about trying to serve a billion people that pill every day. That’s not going to scale.

Researchers priced generic semaglutide across formulations using 33 active ingredients. A year of the injection can be produced for well under $150, and most of that isn’t the drug at all: it’s the disposable injector pen. A year of the 14-milligram pill costs about $360 to produce. And Novo’s weight-loss pill isn’t 14 milligrams. It’s 25 milligrams. Our estimate is that Novo’s pill costs the company 4x to 5x as much as its injection costs to make.

Now, perhaps some people would pay more for a pill – but not many. And especially not when there’s a pill that’s cheaper and vastly more effective in real-world dosing.

Lilly’s orforglipron, approved April 1 and sold as Foundayo, is a small molecule that delivers 30% to 40% of a swallowed dose into the bloodstream. It needs no absorption enhancer and imposes no food restriction. It absorbs 40x to 100x more efficiently than oral semaglutide, and it belongs to a chemical family that costs one-50th as much to produce.

The cost of making enough semaglutide to enable pill production shows up in Novo’s financial statements. Novo’s gross profit margin fell from 84.9% in Q2 of 2024 to 78.2% in Q2 of 2026. Its capital spending has climbed from 6 billion kroner in 2021 to 60 billion kroner in 2025 (or US$935 million rising to US$9.4 billion), a 10-fold increase in four years. Novo also paid $16.5 billion in cash to buy the contract manufacturer Catalent (formerly CTLT) outright, purely to get its hands on more pen-filling capacity.

You can see how Novo is dealing with the threat from Lilly’s superior chemistry by watching Novo’s mergers-and-acquisitions activity. In May 2025, Novo Nordisk agreed to pay Septerna (SEPN) more than $200 million up front as part of a $2.2 billion deal for access to a platform that discovers small molecules acting on the same receptors Novo’s drugs target. Novo funds all the research. In February, it committed up to $2.1 billion to Vivtex, an MIT spinout, for a robotic screening system that tests thousands of formulations a day looking for ones that let a peptide survive the gut.

The battle isn’t about discovery anymore. The battle is engineering. When Lilly begins to compete on price, how will Novo recoup the cost of these massive investments? My bet: it won’t.

Lilly told investors a year ago that it expected to launch Foundayo worldwide without supply constraints. No peptide manufacturer can make that promise. Novo spent 2022 through 2024 rationing semaglutide, restricting starter doses and warning patients of shortages, because it could not make the peptide fast enough. Lilly, meanwhile, manufactured its pill before the FDA had even approved it. Its 2025 annual report disclosed $1.5 billion of pre-launch inventory sitting on the balance sheet as of December 31. Billions of tablets, ready to be sold.

Foundayo launched on April 1 at $149 a month for the starting dose through Lilly’s own pharmacy, rising to $349 per month at the maintenance dose. Patients with commercial insurance pay as little as $25 a month. Eligible Medicare patients pay $50 a month beginning July 1. Novo is competing with a list price near $1,349 for its semaglutide pill. Who is going to buy it?

Lilly launched Foundayo in Britain on August 23. Private providers there sell it at £100 to £120 a month ($136 to $163). Mounjaro, Lilly’s own injection, lists at £133 a month for the starting dose and £330 for the highest. So Lilly priced its pill below the cheapest injection it sells.

Lilly has filed orforglipron for approval in more than 40 countries. It filed with China’s National Medical Products Administration at the end of 2025, for both obesity and type 2 diabetes. In March, it committed another $3 billion over 10 years, adding tablet production in Beijing and expanding injection capacity at the plant it has run in Suzhou since 1996. That takes Lilly’s total investment in China to nearly $6 billion.

In total, Lilly has committed more than $50 billion to manufacturing since 2020. It’s building a $6.5 billion chemical plant in Houston to keep ramping Foundayo. It’s building a $3.5 billion injectables factory in Lehigh Valley, Pennsylvania, for its forthcoming new peptide, retatrutide. The plant won’t open until 2031 – so clearly Lilly believes there’s a vast amount of future demand for metabolic health products. And I believe they’re right.

Apple (AAPL) has shipped 2.64 billion iPhones as of March 31, 2026. Cumulative iPhone revenue since 2007 runs well past $2 trillion. The iPhone is, by far, the best-selling consumer product of all time. But I believe Lilly’s portfolio of metabolic health products will surpass Apple’s iPhone revenue. Do other analysts see this kind of potential? Morgan Stanley puts the combined diabetes and obesity market at $190 billion a year by 2035.

And with its next drug (retatrutide), Lilly will show the world what’s truly possible with this class of drugs.

Lilly’s current GLP-1 product, tirzepatide, activates two gut-hormone receptors. GLP-1 tells the pancreas to release insulin after a meal, slows how quickly the stomach empties, and signals the brain that eating can stop.

GIP is the second receptor, and it is the reason Lilly’s shot outperforms Novo’s. GIP stands for glucose-dependent insulinotropic polypeptide. Like GLP-1, it is a hormone your gut releases within minutes of food arriving, and like GLP-1, it tells the pancreas to make insulin. But GIP is different from GLP-1 in two critical ways. First, it acts directly on fat tissue, improving how efficiently fat cells absorb and store energy instead of leaving that energy to circulate in the blood. Second, and commercially more important, GIP appears to raise the threshold at which the brain triggers nausea. That means a drug hitting both receptors can be pushed to a higher dose before patients quit. Most of tirzepatide’s advantage over semaglutide comes from that headroom.

Hitting both receptors produced $9.9 billion of Mounjaro sales and $4.9 billion of Zepbound sales in Q2 of this year alone. The molecule’s composition-of-matter patent, the patent covering the substance itself and the hardest kind to work around, runs in the United States until January 5, 2036. But long before this patent expires, Lilly will have innovated much better drugs. And sold billions of pills.

The next innovation is retatrutide, which is a GLP-1 peptide that adds a third receptor. Glucagon is insulin’s mirror image. When your blood sugar falls, the pancreas releases glucagon, and the liver answers by breaking down stored glycogen and pushing glucose back into the blood. Adding a glucagon receptor to a weight-loss drug sounds backwards, since you are deliberately stimulating the hormone that raises blood sugar. What you buy is energy expenditure. Glucagon signaling raises the rate at which the liver burns fat and lifts resting metabolic rate.

So tirzepatide works the intake side of the equation: it reduces how much a patient eats and improves how well the body handles what does get eaten. Retatrutide adds the output side. The patient eats less and burns more. Lilly expects to file for approval in Q1 2027. Retatrutide gives Lilly an edge that many customers will pay up to receive.

Meanwhile, today Eli Lilly trades at 28x next year’s consensus earnings, which is only a small premium to the market.

Action to Take: Buy Eli Lilly (NYSE: LLY) below $1,500 per share

As with our other major pharma recommendation – Novartis (NYSE: NVS) – we recommend using an 80/20 allocation on this position, where you invest 80% of your capital into the equity and 20% of your capital into a long-dated call option with a strike price that is between 5% and 10% “out of the money.”

Moderna’s New Personalized Cancer Vaccine

In 1891, a New York surgeon named William Coley began injecting live streptococcal bacteria directly into tumors he could not cut out. He had noticed that patients who developed raging post-surgical infections sometimes watched their cancers shrink. He treated more than 1,000 patients and documented cures above 10% in cancers that otherwise killed everyone. Parke-Davis, later absorbed into Pfizer (PFE), sold a version of his toxin from 1899 until 1951.

The logic never changed: the immune system can kill cancer, and it will do so if you show it the right target.

Researchers identified the first usable molecular target on tumor cells in 1991. Dozens of companies then spent 20 years and billions of dollars building vaccines against targets like it. Nearly all of them failed for the same reason. Those targets were the patient’s own proteins, present at low levels in healthy tissue and merely overproduced by the tumor. Your immune system spends enormous effort learning not to attack your own proteins, because attacking them causes autoimmune disease. Training it to break that rule means overriding a safety system, and the safety system usually wins.

Subscribers who followed my work in the mid-2000s will remember Antigenics, which trades today as Agenus (AGEN). Antigenics manufactured a vaccine called Oncophage individually from each patient’s own surgically removed tumor. Genuine personalized medicine, 20 years too early. Its Phase III trial in kidney cancer randomized 818 patients. The hazard ratio for recurrence came in at 0.923, with a confidence interval running from 0.729 to 1.169 and a p-value of 0.506.

The point estimate suggested 8% fewer recurrences. The confidence interval crossed 1.0 in both directions, meaning the vaccine might have helped by 27% or harmed by 17%. The p-value said a coin flip explains the whole result. Antigenics collapsed, renamed itself Agenus in January 2011, and built a business around the adjuvant Antigenics used to provoke an immune response (QS-21).

Dendreon (formerly DNDN) came next. Its personalized cancer vaccine, Provenge, was grown from each patient’s own immune cells. It won its Phase III trial, extending survival in prostate cancer by 4.1 months at a hazard ratio of 0.78. The FDA approved it in 2010. It showed no effect whatsoever on how fast the cancer progressed.

Then Dendreon priced it at $93,000 a course and… no one bought it. The company filed for bankruptcy in November 2014, and on May 6, 2015, the European Commission withdrew Provenge’s marketing authorization across the entire European Union. Not for safety. Not for efficacy. Dendreon requested the withdrawal itself, because it could not get European payers to reimburse for the drug.

In 2007, Genitope ran 287 patients through a lymphoma vaccine trial and delivered 19 months of progression-free survival versus 23 months on control. Worse than nothing. The stock halved the day the results came out. It delisted it nine months later.

After all these failures, most people assumed that personalized cancer vaccines would never work. But then three things changed.

First, the targets changed. Instead of vaccinating against the patient’s own normal proteins, laboratories now sequence the tumor’s DNA alongside the patient’s healthy DNA, subtract one from the other, and isolate the mutations that exist only inside the cancer. Those mutated proteins are genuinely foreign. These proteins are called neoantigens.

Second, checkpoint inhibitors arrived. Tumors survive by displaying molecular signals that switch off immune cells as they approach. Checkpoint inhibitors like Merck’s Keytruda block those signals. The old vaccines were pushing immune responses into a system the tumor could turn off at will, which is precisely why they generated beautiful laboratory data but didn’t save patients. Now that switch gets disabled.

Third, as we’ll be discussing for years, the engineering has gotten much better. mRNA (messenger RNA) solved the delivery problem: it carries the instructions directly into a cell, so the patient can make precisely the right antibodies. Encode dozens of neoantigens and the patient’s own body will manufacture all of them. Moderna’s product encodes up to 34 antigens, matched to that individual’s specific cancer. Production time fell from 50 or 60 days to about six weeks.

The individualized product cut recurrence at a hazard ratio of 0.51, with a confidence interval of 0.294 to 0.887 and a p-value of 0.0075.

In other words, the vaccine reduced cancer’s recurrence by about 50% – an outcome that was almost impossible by chance alone.

While the intellectual property around these vaccines and their delivery systems is, of course, complicated (like all IP in biotechnology) Moderna’s durable advantage rests on two assets that offer a moat beyond patents.

The first is the algorithm that picks which mutations go into the vaccine. In the largest published benchmark, ranking candidate neoantigens by how tightly they stick to the immune system’s display molecules identified genuinely useful targets less than 20% of the time. Filtering instead for whether the fragment actually appears on the cell surface, and whether a T-cell can recognize it, lifted accuracy above 70%. The clinical numbers are harsher still. Only 2% of computationally predicted neoantigens provoke a response in the laboratory. And in a pancreatic trial run by BioNTech SE (BNTX), only 11% of the selected targets produced a detectable immune response in patients.

Moderna’s vaccine holds 34 slots. At an 11% hit rate, four of them are doing something; at 70%, 24 are. Moderna’s algorithm is producing a better vaccine. And that advantage widens with every patient Moderna treats and learns from.

The second asset is Moderna’s factory. Every manufacturing batch treats exactly one patient. Moderna’s annual report states that the process scales out in parallel rather than up: you cannot build a bigger vessel and serve more people; you have to replicate the entire line. Moderna’s total dedicated capacity consists of one building: 140,000 square feet in Marlborough, Massachusetts. It cost around $400 million to build. Across the 10 solid tumors where this approach could work, American surgeons treat roughly 815,000 operable cases every year. Virtually every patient would want a personalized cancer vaccine, if having one meant a 50% better chance of extending cancer-free remission over a meaningful period (years). So, for now, it’s Moderna’s one building, against 815,000 American patients a year.

Currently, Moderna has no close competitor at all. BioNTech runs the only comparable program at scale and expects no pancreatic results before 2031. Genentech, the Roche Holding AG (SWX: ROG) subsidiary, abandoned its cancer vaccine partnership with the Norwegian developer Nykode Therapeutics.

Over the trailing 12 months through June 30, Moderna revenue was $2.23 billion and gross profit was $521 million, a gross margin of 23.4%. Research spending consumed $2.88 billion, 5.5x gross profit. The operating loss was $3.32 billion, or $7.99 a share. Moderna holds $6.91 billion of cash and investments with no reported debt, and it burns $1.24 billion a year, leaving 5.6 years of runway.

Analysts expect Moderna to lose $4.93 a share next year on $2.40 billion of revenue. Consensus is modeling almost no cancer-vaccine revenue at all through the end of 2027. Strip out the cash, and the market is valuing this business at $51 billion.

Moderna’s partner in this pivotal trial was Merck, which is seeking ways to extend the patent life of its best-selling checkpoint inhibitor, Keytruda. Merck books the sales and the two companies split the profits equally. Sell-side analysts put peak melanoma sales at $5.4 billion per year. Our base case assumes the vaccine reaches melanoma and lung cancer, which gets us to $11.4 billion in peak franchise revenue per year. Assuming 38% operating margin, that throws off $4.3 billion of profit per year. Moderna keeps half. As an estimate (we don’t know how long it will be before competitors emerge), we’ll use a 13-multiple on these earnings. That gets us to a future total value of $28 billion. But this market could easily grow much larger. Broad adoption across solid tumors at costs below $45,000 gets us to $92 billion.

Discounting those future values back to today yields a potential present value of $11 billion to $36 billion. On a Moderna per-share basis, that’s $27.56 or $90.42. That’s a very wide range of potential value for an investor to estimate today – welcome to biotech investing! And it’s even more difficult in this case because this entire approach is new, is extremely expensive, and doesn’t scale easily.

Manufacturing costs more than $100,000 per patient today. And this drug gets given to people whose cancer has already been cut out, who show no detectable disease anywhere in their bodies, and who feel completely fine. That’s a lot of money for an insurance company to approve… to someone who is currently healthy.

Provenge worked. It won its trial, and the FDA approved it. Then it was pulled out of Europe entirely, because payers would not shell out $93,000 for a drug given to patients who were not visibly, terminally ill. Moderna and Merck are proposing a six-figure therapy for patients who, while at great risk for further disease, are not currently sick. Who will pay that much?

One more thing. After Merck and Moderna announced that the trial met both of its endpoints, the market added $36 billion to Moderna’s value. That’s the present value of my most aggressive forecast for this product. I estimate that fair value on Moderna’s other business lines (an approved COVID vaccine, an approved RSV vaccine, a late-stage flu program) and its associated intellectual property is worth something around $15 per share. Add this to my estimates on the present value of the cancer vaccine, and you get something between $45 and $110. But the stock is trading above that – at $140 per share! Too expensive to recommend right now.

I suspect we will see a major pullback in Moderna’s shares at some point as the difficult economic reality of a $100,000 cancer vaccine plays out.

But what about Merck? Merck collects the other half of the vaccine profits; it sells the Keytruda that the vaccine must be given alongside, and it trades at only 16.1x what analysts expect it to earn in 2027. Keytruda generated 48.7% of Merck’s 2025 revenue. And Keytruda loses United States exclusivity in 2028. The stock has been trading very cheaply because of the risks Merck faces with the Keytruda patent cliff. I bought it personally earlier this year primarily because of its dividend and because it’s a very high-quality, low-volatility stock that fits with my “Honeycomb Strategy.” I didn’t buy it because of the cancer vaccine – in fact, before I took up this work in July, I didn’t know anything about Moderna’s cancer vaccine. But the shares jumped on that news and are now up 40% year-to-date. No, it’s not an expensive stock. But it’s not cheap anymore. I’m going to pass for now. If there’s a big drawdown, I’ll do a complete review of it.

Portfolio Review And Actions

Present value is our estimate of what a share is worth today on the evidence in hand. It’s not a price target, as we believe in letting our winners run. We don’t want to sell a great business when we have a good entry price. Buy below is the highest price at which we would put new money to work.

Eli Lilly enters at our 14% cap for integrated and tollbooth businesses, sized by inverse volatility alongside Novartis (NVS). Moderna would enter under our 10% cap for companies with marketed products, once it trades below $110.

Big Month Of News For uniQure

uniQure (Nasdaq: QURE) is a Hold.

Its AMT-130 is a gene therapy for Huntington’s disease. Huntington’s is caused by a single inherited defect that makes a mutant protein which slowly kills neurons in a part of the brain called the striatum. Patients lose motor control, then cognition, then everything, over 15 to 20 years. There is no treatment that changes the course of the disease.

AMT-130 is delivered by a neurosurgeon, through the skull, guided by MRI, directly into the striatum, in a single procedure. A viral vector carries instructions that make neurons produce a small RNA that silences the mutant gene.

Two things will happen this month. uniQure will present four-year data with a June 30 cutoff, covering 12 high-dose and 12 low-dose patients. The three-year data (previously published) is why the stock has tripled. On the primary measure – a composite score built from motor, cognitive, and functional tests – treated patients declined 0.38 points against 1.52 for an external control group, a 75% slowing, at p equal to 0.003. Functional capacity slowed 60% at p equal to 0.033. That is the most convincing result anyone has produced in Huntington’s disease.

September’s presentation is evidence about durability, and we suspect it will report data that’s stronger than the three-year data. We also believe this drug will receive approval this year, despite the very small number of patients and the lack of a real control group.

There’s a lot of history here. On November 3, 2025, FDA’s pre-submission feedback said it no longer agreed the Phase I/II data were adequate as primary evidence and the data were “currently unlikely” to support a filing. The shares fell from $67.49 to roughly $26. In June 2026, after a follow-up meeting, the agency reversed and agreed that the three-year analysis is acceptable as the primary basis for accelerated approval.

Here’s the real problem: uniQure has no placebo arm. These trials compared treated patients against a matched set drawn from Enroll-HD, an observational registry, selected by a statistical technique that pairs patients on baseline characteristics.

In February 2026, the FDA rejected a gene therapy for Hunter syndrome under similar circumstances: uncertainty in the eligibility criteria, comparability of the natural-history control, and the appropriateness of the biomarker. The agency noted that the control group was mismatched on age and baseline cognition.

uniQure’s filing rests on the same architecture: a small, treated cohort against a matched external control.

In addition, this division of the FDA has spent 2026 tightening the screws on gene therapy delivered to the brain. In January, it halted two REGENXBIO trials after a tumor appeared in an asymptomatic five-year-old dosed four years earlier, and the resected tumor showed viral genetic material integrated next to a cancer-causing gene called PLAG1. Causality was never established, and no other patient in either trial had a tumor. In August, the agency halted the same program again after spine imaging in five patients turned up small nodules, all judged benign. And in November 2025 the FDA put a boxed warning on Sarepta’s Duchenne gene therapy for fatal liver injury and pulled the indication for non-ambulatory patients.

The FDA is very worried about using viral vectors for gene therapy… and it’s easy to understand why.

But we think it’s likely that uniQure will get approval because there’s no other possible therapy and these results look strong. In 2023, the FDA granted accelerated approval to Qalsody for a form of ALS on the strength of a reduction in neurofilament light, a protein that leaks out of dying nerve cells, in 108 randomized patients. uniQure’s neurofilament data was 8.2% below baseline at three years on the high dose. We think there’s enough proof that the therapy is slowing the disease to warrant approval.

And so, we’ll hold.

Silence Therapeutics Closer To Divesiran Approval

Silence Therapeutics (Nasdaq: SLN) remains a Speculative Buy with a raised buy price.

Polycythemia vera is a blood cancer in which the bone marrow makes too many red cells, the blood thickens, and thick blood clots. The standard treatment has not fundamentally changed in a century: a nurse drains blood out of the patient, therapeutic phlebotomy. The body already has an off switch for making red blood cells. It’s a hormone called hepcidin that controls how much iron is available to the marrow. Iron is the raw material for red cells, so turning hepcidin up starves the marrow of what it needs and fewer red cells get made.

There are two ways to raise hepcidin. You can inject synthetic hepcidin, or you can help the patient produce more of his own. Protagonist Therapeutics (PTGX) and Takeda Pharmaceutical (TAK) took the first route with a peptide called rusfertide, and on August 28 the FDA approved it as Mimrylo.

Silence is taking the second approach. Divesiran is a small interfering RNA that silences a gene called TMPRSS6, whose protein is the brake on the body’s own hepcidin production. Release the brake, and the patient makes more of their own hepcidin.

Until August 28, the case for divesiran rested on a theory: that raising hepcidin controls polycythemia vera. The FDA has now approved a drug that does exactly that, on the strength of a randomized Phase III trial in 293 patients. The mechanism is no longer a hypothesis but a labeled indication. Mimrylo won approval on a single endpoint: the share of patients who did not become eligible for phlebotomy between weeks 20 and 32. Eligibility was defined precisely, as a confirmed hematocrit at or above 45% that also ran at least three points above the patient’s own baseline, or a hematocrit at or above 48%. Silence now knows the endpoint, its exact definition, and the trial size it will require to gain approval.

This new drug also begins to build the market for this kind of therapy. Somebody has to persuade hematologists to stop draining blood and start writing a prescription, and somebody has to get insurers to pay for it. Takeda has both the sales force and every incentive to do that work. Silence arrives after the category exists… but it will be second to market. What does that mean? Mimrylo is a once-weekly injection. Divesiran is one injection every twelve weeks. That’s fifty-two injections a year against four.

Regarding efficacy, Silence’s Phase II produced 88% clinical responders against 19% on placebo, at p below 0.0001, in 48 phlebotomy-dependent patients. Mimrylo produced 76.9% responders against 32.9% on placebo.

Silence sold $175 million of stock at $13.50 (right above our buy-up-to price) on the strength of the divesiran data.

We are raising our buy-below price from $13 to $16 and our present value estimate to $22.

Keeping A Watch On Arrowhead Pharmaceuticals

Arrowhead Pharmaceuticals (Nasdaq: ARWR) remains on the watchlist..

Plozasiran is a small interfering RNA (siRNA) that silences APOC3, a gene whose protein blocks the body from clearing fat out of the blood. Silence it, and triglycerides fall. It is injected under the skin once every three months. The FDA approved it on November 18, 2025, as REDEMPLO, for familial chylomicronemia syndrome, a genetic disorder affecting roughly 6,500 Americans. Arrowhead’s management has set the wholesale price at $45,000 per patient per year. In the June quarter, REDEMPLO produced about $2.4 million of revenue across more than 400 prescribers, roughly double the prior quarter.

Expanding the label is the company’s strategy. Roughly 2.3 million American adults carry triglycerides above 500 milligrams/deciliter (“mg/dL”), based on two decades of federal health survey data. Arrowhead will file for that population before the end of this year. And, on August 30, at the European Society of Cardiology congress in Munich, the company presented the trial data to support the filing. SHASTA-3 and SHASTA-4 randomized 757 adults to four quarterly doses or placebo. Triglycerides fell 79% and 81% at 12 months, both at p below 0.0001, and 85% in patients who started above 880 mg/dL.

Very high triglycerides cause acute pancreatitis, a sudden inflammation of the pancreas that hospitalizes patients and sometimes kills them. Pooled across both trials, pancreatitis events fell 78%, In patients who had already survived one attack, events fell 91%. Safety was clean: serious adverse events were 8.3% on drug against 10% on placebo, and 1.4% of patients discontinued against 0.8% on placebo.

Arrowhead isn’t the first to market here. On June 24, the FDA approved Ionis Pharma’s olezarsen as Tryngolza for the same population. Arrowhead’s competitive answer is dosing and depth: olezarsen is a monthly autoinjector, and plozasiran is quarterly. Olezarsen cites a 66% triglyceride reduction against Arrowhead’s 79% to 81%, and an 85% pancreatitis reduction against Arrowhead’s 78%.

Arrowhead carries roughly $1.22 billion of debt against $1.57 billion of cash and investments. The largest piece is a $400 million senior secured loan from Sixth Street. Interest runs at 15%, payable in kind rather than in cash, secured by a first lien on substantially all assets including the intellectual property itself. The company also has $700 million of zero-coupon convertible notes due January 2032 with a conversion price near $87.07.

Our $85 present value is built in four steps. We start with Morgan Stanley’s $3.2 billion peak plozasiran estimate, which that firm doubled from $1.7 billion in April, and value it at three times peak sales. We add $2 billion for the partnered royalty streams on olpasiran with Amgen and fazirsiran with Takeda, plus the obesity programs. Then we add the cash and subtract the debt. At $81.38, you are paying 3.5x Morgan Stanley’s peak-sales estimate for the whole enterprise, on a drug that is second to market with an interest bill that compounds at 15%.

We are keeping a watch on Arrowhead Pharmaceuticals until we see a price decline. We hope there’s a pullback in biotech this fall that allows us a good entry price.

Halozyme: Adding Another Tollbooth

Halozyme Therapeutics (Nasdaq: HALO) joins the recommended list with a Buy Below of $110, with a present value of $124.

Most antibody drugs have to be dripped into a vein, which means the patient sits in an infusion chair for hours and the hospital bills for a nurse, a chair, and a bag. Halozyme owns an enzyme called rHuPH20 that temporarily loosens the mesh of tissue under the skin, so the same drug can be pushed in with a syringe in minutes. It licenses that enzyme to drug companies under the name ENHANZE and collects a royalty.

Halozyme runs no trials, treats no patients, and files for no approvals. Roche Holding (SIX: ROG), Johnson & Johnson (JNJ), Takeda Pharmaceutical (TAK), Argenx (ARGX), and Bristol-Myers Squibb (BMY) do all of that. Halozyme cashes checks.

In June, royalty revenue rose 50% to $307.7 million, of which $152.2 million came from DARZALEX, the subcutaneous myeloma drug Johnson & Johnson sells.

Management raised full-year guidance for the second time this year, to $1.835 billion to $1.910 billion of revenue and non-GAAP earnings of $8.65 to $9.00 a share, up from $7.75 to $8.25. And it bought 4.8 million of its own shares in the quarter for $332.8 million, at an average price of $69.30, under a $1 billion authorization that runs through 2028.

One U.S. patent covers the composition of rHuPH20, which is licensed in every ENHANZE agreement. And it expires on September 23, 2027. That’s why Goldman Sachs rates the stock a Sell with a $58 target. But the royalty steps down, it does not stop. Halozyme’s filings reveal that when the rHuPH20 patent expires in a country, the royalty rate is reduced rather than terminated, and the company says the reduction never exceeds 50%. Apply the worst case to the exposed share of the royalty base, and we get a hit of roughly $1.85 a share against consensus 2027 earnings of $10.31. Halozyme guides DARZALEX royalties as secure through 2032.

And there is a second platform that is not in any existing license. MDASE is a separate family of modified hyaluronidases with 99 patents and applications, exclusive through 2032 outside the United States and 2034 inside it. Every new agreement Halozyme signs can be written on MDASE rather than ENHANZE. The company has signed five new agreements this year against a goal of three, including a global oncology collaboration with GSK (GSK) in May.

And there’s a potential kicker – a big one. Halozyme sued Merck in April 2025, claiming that subcutaneous Keytruda infringes 15 MDASE patents. A German court granted a preliminary injunction against subcutaneous Keytruda in December 2025.

If you’ve watched Veeva Systems (NYSE: VEEV) over the last month – up more than 40% – you’ll understand why I prefer to own biotech’s tollbooths.

Action to Take: Buy Halozyme Therapeutics (Nasdaq: HALO) up to $110 per share

BioNTech’s Failure

On August 28, BioNTech SE (BNTX) terminated the Phase II trial of autogene cevumeran, its individualized mRNA cancer vaccine partnered with Genentech, the Roche Holding subsidiary. The shares fell 8%. We do not own BioNTech, but what happened in this failed trial is important.

The independent Data Safety Monitoring Board found a numerical imbalance in overall survival between the two arms and concluded that continuing would not change the efficacy result. Reuters reported that analysts read that imbalance as more deaths in the vaccine group than in the control group.

BioNTech enrolled patients with high-risk stage II or stage III colorectal cancer who had already had surgery, then three months of chemotherapy, and who still had circulating tumor DNA in the blood afterward. Circulating tumor DNA is what it sounds like: fragments of cancer genome floating in the bloodstream. Finding it after surgery means the surgeon did not get everything.

But the vaccine was given as monotherapy, without a checkpoint inhibitor. Moderna’s product is given with Keytruda, Merck’s checkpoint inhibitor.

Bicycle: You Are Being Paid To Own The Pipeline

Bicycle Therapeutics (Nasdaq: BCYC) is our most uncomfortable Buy.

Bicycle holds $510.1 million of cash against $96.3 million of total liabilities and no debt at all, leaving $413.7 million of net cash, or $5.96 a share. So you are paying $4.14 for $5.96 of cash, which puts the enterprise value at negative $127 million. The market is paying you $1.83 a share to buy the stock.

Bicycle makes bicyclic peptides: short chains of amino acids chemically stapled into two rigid loops, which lets a very small molecule bind a target with the precision of an antibody and then clear the body in hours rather than weeks. Attach a chemotherapy payload, and you get a tumor-seeking missile that does not linger in healthy tissue. The lead drug, zelenectide pevedotin, targets a protein called Nectin-4 that sits on the surface of bladder-cancer cells.

There is already a Nectin-4 drug, and it is a good one. Padcev, from Pfizer (PFE) and Astellas, produced a confirmed response rate of 67.7% with pembrolizumab in first-line advanced bladder cancer and did more than $1.9 billion of sales in 2025. Zelenectide’s confirmed response rate in the equivalent setting was 58% to 62% in 26 patients.

Padcev’s label carries a boxed warning for severe and fatal skin reactions. Skin reactions occurred in 70% of patients on the combination, 17% at grade 3 or 4, with fatal bullous dermatitis in 0.2%. Peripheral nerve damage occurred in 67%, and 87% of those patients still had it at last evaluation. Zelenectide, at its selected dose, produced skin reactions in 17% and neuropathy in 33%, with no severe skin reactions at any grade.

On March 17, regulators told Bicycle that its pivotal trial design would not support accelerated approval in metastatic bladder cancer. The company converted the trial to a randomized Phase II, cut 30% of its staff, and set out to reduce operating expenses by half.

Its partners left. Genentech gave notice in July 2025, and Novartis followed later that year. Bayer terminated one target program in November 2025 and the entire agreement in July 2026, effective this month. Those three deals carried $45 million to $50 million of upfront money each and up to $1.7 billion of milestones apiece. Bicycle had collected $240.2 million of partner cash across its history and now has only one active collaboration, with Ionis.

In short, the outlook looks dark. But that’s why the stock is cheap. And we believe the underlying technology holds a lot of promise. The drug is not dead, and neither is the differentiation. Bicycle is still running the randomized Phase II and expects data in the second half of this year. In the Phase I first-line study, in patients too sick for cisplatin, zelenectide plus pembrolizumab produced a 59% response rate and median progression-free survival of 13.0 months. In late-line monotherapy, 38% responded with a median duration of response of 10.0 months. Those are not failing numbers.

Meanwhile, Bicycle is moving its resources to radioconjugates: the same targeting peptide carrying a radioactive isotope instead of a chemotherapy payload. It has locked up the hard part of that business, which is not the chemistry but the fuel. Bicycle signed a 15-year contract with the UK Nuclear Decommissioning Authority for access to up to 400 tonnes of reprocessed uranium, and it is working with the UK National Nuclear Laboratory to extract thorium-228 from it. It has exclusive lead-212 generators from SpectronRx and a supply agreement with Eckert & Ziegler. Novartis built a $2 billion drug in Pluvicto and an $816 million drug in Lutathera on this idea, and the constraint on the whole field is isotope supply. Bicycle’s first company-sponsored radioligand trial starts in 2027.

Bicycle Therapeutics is a Speculative Buy, below $5.00, with a present value of $7.50.

Good investing,

F. Porter Stansberry
Stevenson, Maryland

For important disclosures and disclaimers, please visit our Legal Disclosures page.

The post The Age Of Discovery appeared first on Porter & Co..

Issue#153, Volume#3

Most Investors Still Don’t Understand Bitcoin – Here’s What They’re Missing

How To Value Bitcoin

Presented By: TradeSmith

What Happens on the 9th Trading Day?

Coming up on the 9th trading day of this month, you buy five specific blue-chip stocks. Then you could potentially watch your money grow like clockwork — all without using leverage or options. Click here to see why just five stocks, and why this one day each month is the only day that really matters.

Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. TradeSmith is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.

3 Things To Know Before We Go…

1. The Atlanta Fed says the economy is growing at a 4.7% annual rate this quarter. That September 3 reading from GDPNow is a “real” figure, meaning it has already subtracted inflation. Add prices back, and nominal growth is running near 8%. The gap with Wall Street is wide: when GDPNow touched 6.2% in early August, economists’ consensus was just 2.2%. At this pace, the October 29 GDP release could show real growth of 6.5% to 7%, five days before the midterms.

2. August hiring puts a September rate hike back in play. U.S. employers added 162,000 workers to payrolls, roughly three times the 53,000 economists had forecast, and the Labor Department revised June and July up by a combined 55,000, turning a reported July job loss into a gain. Unemployment held at 4.1%. With inflation still above the Fed’s 2% target, Chair Kevin Warsh might push to raise rates. Futures pricing for a quarter-point hike on September 16 moved to 59% from 52% before the release. The two-year Treasury yield, the maturity most sensitive to Fed policy, hit its highest level since January 2025.

3. Diesel shortage sends prices to new high. The U.S. national average price of diesel fuel has reached a record $5.62 per gallon, surpassing the prior high of June 2022. The market is grappling with an unprecedented shortage driven by the supply-chain disruptions from the war with Iran, with inventories at the lowest seasonal levels on record. Given diesel’s role as a critical transportation fuel, this will likely push prices higher throughout the economy, leading to sticky inflation in the months ahead.

Chart Of The Day… Morgan Stanley Bitcoin Trust (MSBT)

The Morgan Stanley Bitcoin Trust (MSBT) has rallied nearly 27% since we re-recommended Bitcoin in the June 20 issue of Complete Investor.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post You Probably Don’t Own Bitcoin And That’s A HUGE Mistake appeared first on Porter & Co..

Before getting into this week’s update, we are recommending the following new covered-call trades:

1. Sell to open one Booz Allen Hamilton (NYSE: BAH) $80 call, expiring October 16, 2026, down to $0.75 per share – the recent price was $1.25 per share
2. Sell to open one Hims & Hers Health (NYSE: HIMS) $33 call, expiring October 16, 2026, down to $0.75 per share – the recent price was $1.15 per share
3. Sell to open one Figma (NYSE: FIG) $25 call, expiring October 16, 2026, down to $1.50 per share – the recent price was $2.00 per share
4. Sell to open one Novo Nordisk (NYSE: NVO) $47.50 call, expiring October 16, 2026, down to $1.00 per share – the recent price was $1.65 per share
5. Sell to open two Triple Flag Precious Metals (NYSE: TFPM) $35 calls, expiring October 16, 2026, down to $1.00 per share – the recent price was $1.55 per share
6. Sell to open one Turning Point Brands (NYSE: TPB) $85 call, expiring October 16, 2026, down to $1.00 per share – the recent price was $2.10 per share

The value of The Trading Club tracking portfolio settled at $131,698 as of Thursday, September 3 – up 31.7% since the May 30, 2025, inception date (see the detailed portfolio snapshot below). We made no trades this week.

In this issue, we explain the rationale behind the covered-call sale recommendations.

Reducing Risk As AI Financing Risk Looms

The covered-call trades we’re recommending today are not about expressing a changing view on any of the underlying stocks. Instead, the goal is to reduce overall portfolio risk, but to do so in a way that still leaves significant upside on the table.

As a reminder, when selling covered calls, we’re making the conscious choice to surrender the upside on the underlying stock at prices above the option strike price. By foregoing that upside to the call-option buyers, we generate a guaranteed return via the immediate cash proceeds collected upon the option sale, regardless of where the stock trades from here. So we’re locking in guaranteed income, while still retaining upside potential – in this case, between 6% and 14% across the various call strikes and the underlying stock prices. Over the relatively brief six-week time period until expiration, this works out to an average annualized return in the triple digits – which, of course, is significant upside.

The advantage of this strategy is it lets us take a more defensive stance in the portfolio, without making an outright bearish bet on the market, which to avoid losing money generally requires impeccable timing.

And that brings us to the current dichotomy in today’s stock market. On the one hand, we’re in the midst of one of the greatest earnings booms in the history of the U.S. stock market, which is fueling upward momentum in stock prices that makes it difficult to become too bearish in the short-term. But the problem is, this earnings growth is almost entirely fueled by a capex boom focused on one single area of the economy: data-center construction for the artificial intelligence (“AI”) revolution. Capital spending on every other area of the economy aside from data centers – housing, commercial and industrial, office buildings, etc. – has fallen $120 billion since 2024.

Every prior capex boom throughout history has ended the same way: when the money runs out. And we’re officially reaching that point, as the companies behind this capex mania are exhausting their access to cheap capital.

Alphabet (GOOG) just posted negative free cash flow for the first time since going public in 2004. One of the most profitable ad businesses ever built, plus YouTube, Android, and a growing cloud arm – all of which used to produce mountains of cash. But now with capex doubling to nearly $45 billion in a single quarter, the company burned through $6 billion in cash for the quarter. And this trend shows no sign of reversing, with management guiding to $200 billion in capex this year, more than doubling from $91 billion last year.

Likewise, Amazon (AMZN) burned through $8 billion in Q2 2026, a stunning reversal from the $18 billion in positive free cash flow for the same quarter last year. This trend will only accelerate as the company plans to spend $220 billion on capex this year, up from $132 billion last year.

It’s the same story across the entire hyperscaler complex, with the group’s free cash flow flipping from hundreds of billions annually into negative territory:

With free cash flow evaporating, America’s tech giants have become some of the world’s largest issuers of debt.

In 2025, the group raised a record $200 billion in debt, including the off-balance sheet obligations issued through special purpose vehicles (“SPV”). That’s 4x more than any previous year in history. And in the first eight months of 2026, they’ve already blown this number out of the water with more than $300 billion in debt issuance so far:

This flood of bond issuance is so large that it’s beginning to crowd out demand for U.S. Treasuries. The 30-year Treasury yield jumped above 5.3% to its highest level in 20 years last month, before a bond-buying intervention from U.S. Treasury Secretary Scott Bessent caused a brief respite. Still, with the volume of tech debt now reaching 70% of U.S. Treasury bond issuance, there’s every reason to expect more upward pressure on borrowing costs across both corporate and government bonds.

The market is showing signs of stress across multiple indicators. Order books covering hyperscaler bond offerings have dropped from nearly 5x oversubscribed in early 2026 to below 2x.

A recent report from Goldman Sachs bond trader Jeffrey Papai noted that the $75 billion of AI-related bond issuance in a single month had left the market “struggling to absorb” the supply, sending the credit spread on Goldman Sachs’ AI bond basket higher by 22 basis points in a single week. Papai also described how the market’s absorption capacity is rapidly deteriorating. It previously required over $75 billion in new issuance to feel pressure, but that number has now dropped to $25 billion as the threshold for putting the market “on the defensive.”

Hyperscalers are now scouring the globe in search of cheaper financing. Alphabet has gone shopping across every major foreign bond market, seeking new offerings denominated in the euro, sterling, Swiss franc, yen, and Canadian dollars. Its recent $8.5 billion Canadian bond issuance was the largest Canadian bond offering in history… that was, until Amazon set a new record weeks later with a $14 billion Canadian bond sale.

With the world’s largest, strongest balance sheets exhausting their borrowing capacity from all corners of the globe, this is a giant warning sign that capital is becoming increasingly scarce. And that’s a big problem for an economy and stock market reliant on raising endless amounts of capital to keep a capex boom humming.

For now, the bulls have momentum on their side. And they point toward the rising backlogs and earnings outlooks from the major suppliers of today’s capex boom – like Nvidia (NVDA) and the hyperscalers – as evidence that this capex cycle is just getting started. But in reality, it’s a financial time bomb just waiting to go off. And all signs indicate that 2027 is when the detonation event occurs.

The Catalyst: OpenAI’s Liability Wall Hits In 2027

The stress point in the AI capex boom lies specifically with OpenAI – owner of ChatGPT – which makes up the largest source of compute commitments supporting the data center buildout.

At this time last year, OpenAI reigned supreme over the AI revolution, with over 70% market share and growing at triple digit rates. On the back of that momentum, between June and December of 2025, OpenAI engaged in the most aggressive debt origination spree in the history of capitalism. The climax occurred over a three-week frenzy in October 2025, when OpenAI signed over half a trillion of future purchase agreements with Oracle (ORCL), Nvidia (NVDA), Advanced Micro Devices (AMD), and Broadcom (AVGO).

In total, this single company has accumulated $750 billion in purchase agreements for data-center capacity and chip sales through 2030. And next year, it begins climbing the steepest part of this contract obligation wall, with $132 billion in bills coming due.

Now here’s the thing: OpenAI’s financials are already a trainwreck before this mountain of additional liabilities hits. In 2025, the company generated $21 billion in losses on $13 billion in revenue, meaning the business lost $2 for every $1 in revenue. And these losses have only accelerated in 2026.

From Q1 to Q2 of this year, OpenAI’s revenue increased by $1 billion from $5.7 billion to $6.7 billion. Over the same period, its losses grew by $3 billion from $9.3 billion to $12.3 billion. The company generated an incremental $3 in losses for every $1 of revenue growth.

In other words, OpenAI loses money on every sale and is trying to make it up in volume. Its own internal financial projections don’t even show the company reaching positive free cash flow until 2030.

But as bad as the Q2 financial results were, this was before the biggest blow yet: a flood of competition from lower-cost, open-source Chinese AI models hit the market.

Early on in the AI revolution, OpenAI’s ChatGPT and Anthropic’s Claude enjoyed a wide gap in performance against all other AI models. But more recently, open-source AI models from China have closed the performance gap with their U.S. counterparts:

Here’s the kicker: these Chinese models have closed this intelligence gap while consuming much less computing power than their U.S. counterparts. As a result, they now offer the same basic AI functionality at a small fraction of the cost, which has crushed pricing across the industry.

The key metric for monitoring the pricing power among the sellers of AI services is the price per million tokens, where a token is the basic unit of text that a language model processes, generates, and is measured by. After reaching a peak of just over $2 per million tokens in June, prices have collapsed to below $1 per million tokens given the rise of fierce competition from low-cost Chinese AI models:

OpenAI has responded by slashing prices in order to stoke demand, including an 80% price reduction for one of its latest models, GPT-5.6 Luna.

History is littered with the ashes of western companies that entered into price wars with China on commoditized products. Steel, rare earth metals, solar panels, electric-vehicle batteries… and now, the same is happening with AI.

This presents an existential risk for OpenAI, and by extension, America’s AI infrastructure boom.

OpenAI needs to raise $750 billion by 2030 just to avoid defaulting on its signed-compute and chip-purchase agreements, not to mention hundreds of billions more to cover overhead.

Our bet is simple: that won’t happen. OpenAI will need a financial miracle just to survive through 2027.

Here again, the fundamental problem is that the cheap capital fueling the AI bubble is running out. And OpenAI is among the most vulnerable companies in this new era of scarce capital.

The biggest tell that OpenAI’s funding window is closing came from the company’s latest capital raise in Q1 of this year. On the surface, it looked like a smashing success: the company pulled off the single largest private capital raise of all time – bringing in $122 billion at an $852 billion valuation. But the real story was in who actually wrote the checks.

Traditional venture capital investors provided only $12 billion, or about 10% of the $122 billion raise. The remaining $110 billion came from the following entities:

1. $50 billion from Amazon
2. $30 billion from Nvidia
3. $30 billion from SoftBank

In other words, the anchor money – two-thirds of the total – came from OpenAI’s cloud-compute provider and chip supplier. This is the same style of vendor-financing that helped inflate demand during the late stages of the dot-com bubble, and also provided the catalyst that led to the bust.

Back then, when venture capital began drying up, companies like Lucent and Nortel juiced demand by lending to dozens of privately held startups. It only delayed the day of reckoning. When those private companies began going bust, it led to massive asset impairments and an evaporation of demand that ultimately ended with Lucent and Nortel disappearing into the dustbin of financial history.

This time, the vendor-financing is concentrated on a single, large entity: OpenAI. But the fundamental mechanics are the same: the lack of demand from venture capital investors for OpenAI shares is currently being propped up by its own suppliers. Companies like Amazon and Nvidia funnel investment capital into OpenAI, which returns that money right back into cloud computing and chip sales to the very same companies.

But now, with hyperscalers like Amazon looking at negative free cash flow and tapping out the debt market, we see no world where these companies can continue sinking hundreds of billions of dollars into an unprofitable startup company. Even Nvidia – previously having pristine credit – is reaching the limits of using its balance sheet to prop up demand from its own customers. Nvidia now has over $500 billion of off-balance-sheet liabilities across its various backstops, investments, and purchase agreements across the AI ecosystem:

We can see growing signs of investor concern about Nvidia’s balance sheet through the company’s credit default swaps (“CDS”) – derivative instruments that protect against debt default – which have recently spiked to record highs following a wave of new circular financing deals:

Given this backdrop, we see limited future availability for OpenAI to tap into circular, vendor-financed capital from Nvidia and the hyperscalers.

But the real weak point in OpenAI’s funding spigot lies with SoftBank (SFTBY), the Japanese holding company that has become a giant, leveraged bet on the AI start up.

In order to fund its latest $30 billion investment into OpenAI, SoftBank took out one of the world’s largest bridge loans – a $40 billion line of credit that matures in March 2027. This at a time when OpenAI was gearing up for a 2026 IPO. According to various media reports, OpenAI CEO Sam Altman was adamant that the company needed to secure at least a $1 trillion valuation for the IPO to proceed.

But after bankers and financial advisors poured over OpenAI’s financials, they balked at the $1 trillion valuation target. Instead, they offered Altman two choices: accept a lower valuation to get the IPO out the door, or delay until 2027 and hope the business improves enough to fulfill a $1 trillion valuation. Altman chose to “hope and wait”… but hope, as they say, is not a strategy.

And it’s already presenting problems for SoftBank, which desperately needed an IPO in order to liquidate its OpenAI stake and repay the $40 billion bridge loan maturing in March. After the IPO progress stalled, in May SoftBank sought out a $10 billion margin loan secured by its OpenAI stake. Something that would have been a routine funding arrangement in the easy-money days was suddenly met with resistance from bankers. Even after scaling down the loan size by 40% to $6 billion, the effort failed. That’s another tell that the financing window for OpenAI is closing: lenders wouldn’t extend a $6 billion margin loan against SoftBank’s stake, valued at $110 billion on the last funding round.

Ultimately, SoftBank was only able to secure the loan by adding a sweetener: guaranteeing repayment itself so lenders would have recourse to SoftBank directly if the pledged OpenAI shares lost value. Still, the conglomerate faces a liquidity crunch without an ability to monetize its OpenAI stake.

SoftBank’s stretched balance sheet made it a junk-rated credit even before this borrowing binge. And absent an IPO that allows it to monetize its OpenAI stake, the company could ultimately become a forced seller of OpenAI shares in the private market. This could crush OpenAI’s private market valuation, and make it all the more difficult to continue raising capital.

Meanwhile, just as SoftBank’s bridge loan comes due in Q1 of next year, OpenAI will be running on fumes. The chart below from Bridgewater Associates projects that OpenAI will run out of cash by Q1 2027, a remarkably short timeline considering the company raised $122 billion just six months ago. And it will need to come up with over $100 billion in new funding next year just to keep the lights on:

Thus, it’s easy to see how the entire system of leverage begins breaking down, absent an OpenAI IPO in the immediate future. But if the executive behavior inside the company is any indicator, the odds of this happening look increasingly remote. Over the past several months, OpenAI has suffered from a continuous raft of departures from key executives, including:

• Brad Lightcap (Chief Operating Officer)
• Denise Dresser (Chief Revenue Officer)
• Fidji Simo (CEO of Applications)
• Kaylin Voss (VP of Sales, Americas)
• Kate Rouch (Chief Marketing Officer)
• Chris Malone (Head of Data Centers)
• Caitlin Kalinowski (Head of Robotics & Hardware)
• Srinivas Narayanan (VP & CTO for Business Applications)
• Kevin Weil (VP of OpenAI for Science / Former Chief Product Officer)
• Bill Peebles (Head of Sora Video Generation Team)
• Barret Zoph (Senior AI Researcher)
• Johannes Heidecke (Head of Safety Systems)
• Chloé Bakalar (Head of Ethics)
• Joshua Achiam (Chief Futurist)

If OpenAI had any reasonable chance of going public, these executives would be forfeiting the opportunity for generational wealth from their stock grants. The fact that we’re seeing a mass exodus is perhaps the clearest indicator that something has gone horribly wrong inside the business, and that this company will never go public.

The bottom line: we see OpenAI as the weak link that could cause today’s AI capex boom to break apart as soon as Q1 2027. Of course, the market hasn’t come close to pricing in this scenario. Maybe the market is seeing something we’re not, or it’s simply caught up in a speculative mania that still has legs left before reality sets in.

In either case, we’re not willing to fight the tide and become outright bearish just yet. But we are shifting to an increasingly defensive stance, and willing to forego upside at this point in the cycle given the risks we see ahead. In the future, we may begin taking outright bearish positions. And we wanted to lay out the rationale now so that we’ll be prepared to act quickly when the time comes.

Next, we’ll show each position in the portfolio broken down by trade type.

Portfolio Review

The table below shows all current holdings as of the close of trading on Thursday, September 3:

A few notes on how to read and interpret this portfolio table.

Please pay special attention to the “Action” column, where we specify whether each trade is a “buy” or “sell to open” transaction.

Next, the position size for each trade is equal to the current value of the position, with the exception of the cash-secured puts. In the case of the cash-secured puts, we define the position size as the total value of our future commitment to purchase 100 shares for each contract. This number is calculated as follows:

Position size = number of contracts x 100 x put strike price

We use this number because it accurately reflects our total capital commitment, and thus our total risk exposure on the trade.

For example, in the case of the Celsius Holdings (Nasdaq: CELH) $30 puts, the position size equals 2 x 100 x $30 = $6,000. We use this number because it accurately reflects our total capital commitment, and thus our total risk exposure on the trade.

To see the current profit/loss across each open position and other details, please see the live snapshot of our tracking portfolio at the end of this update.

We have compiled a summary overview of the latest quarterly trades released on June 22, which you can find here. Since then, we have recommended the additional trades listed below:

1. On July 17, we recommended purchasing shares of Novo Nordisk (NYSE: NVO), which you can find here
   
2. On July 21, we recommended purchasing shares of Hims & Hers Health (NYSE: HIMS), and we provided the analysis for the company on July 24, which you can find here

If you have any questions or feedback, The Trading Club Forum is the best chance to get a quick response from our team.

Alternatively, you can always email us at mailbag@porterandcompanyresearch.com.

Good investing,

Ross Hendricks
Porter & Co.

The post Trade Alert And Update – Week Of August 31, 2026 appeared first on Porter & Co..

Issue#152, Volume#3

Follow The Cash – It’s Called Checkbook QE

Editor’s note: Today, Porter turns the Journal over to his friend Marin Katusa, of Katusa’s Resource Opportunities – who shares the latest opportunities related to gold.

Why The Treasury Is Doing The Fed’s Job

The Most Famous Chart In The Gold Market

Ten Years Of Doing This

Presented By: Katusa Research 

An Important Personal Invitation From Marin Something I’ve Never Done in 10 Years — And Will Never Do Again…

Marin Katusa is different from the people who just send you stock tips.

He doesn’t only talk about mines and projects.

He finances them.

He’s in the room when the deal is struck, often with millions of his own dollars committed, at the very same price his readers get.

When he tells you to buy something, his money is already in it.

And right now, you can join his research service for the lowest price in a decade.

Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. Katusa Research is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.

3 Things To Know Before We Go…

1. The AI economy is eating the real economy’s lunch. New Commerce Department data shows that spending on data-center construction dwarfs that on all other private construction. Since December 2023, data-center construction spending is up roughly $45 billion, while everything else – housing, retail, warehouses, manufacturing plants – is down $120 billion and declining. The private economy is being crowded out of capital, labor, and power by one single sector.

2. The latest circular financing deal. Nvidia (NVDA) and Anthropic have signed a $35 billion cloud-compute deal with Nvidia-backed cloud provider Lambda. In this deal, Lambda will buy the much-in-demand GPU processing chips from Nvidia and then rent them to AI platform Anthropic through a data center site that Nvidia holds the lease on. Yes, that’s right, Nvidia performs three roles in this deal: underwriting the data center, providing equity-backing for the cloud tenant, and supplying the silicon that generates the rental revenue flowing back through the chain. It’s the latest example of the vendor-financing boost Nvidia is providing to stoke demand throughout the AI ecosystem.

3. Erasing six years of falling software prices. The PCE Price Index for computer software and accessories – a measure inside the Fed’s preferred inflation gauge – has risen at a 39% annualized rate year to date, wiping out roughly six years of decline in just eight months. The broader information processing category – which covers computers, tablets, accessories, and software – rose 15.5% over the past year, and 1.4% in July alone. We’ve been told that AI will push prices down, but we aren’t seeing it yet.

Chart Of The Day… Gold

The declining dollar and a turbulent U.S. Treasury market have sent global investors and central banks back to where they feel safe… gold is up 12% over the last month.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post The Most Famous Gold Chart This Year appeared first on Porter & Co..

Issue#151, Volume#3

There’s Big Money In Boats Right Now – But Careful, It Won’t Last

How To Bet On The Boats

It Happened Again In 2008

Presented By: TradeSmith

What Happens on the 9th Trading Day?

Coming up on the 9th trading day of this month, you buy five specific blue-chip stocks. Then you could potentially watch your money grow like clockwork — all without using leverage or options. Click here to see why just five stocks, and why this one day each month is the only day that really matters.

Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. TradeSmith is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.

3 Things To Know Before We Go…

1. Federal tax revenue keeps rising, but spending is rising faster. The U.S. Treasury collected a record $5.23 trillion in fiscal 2025, up 6.4% from the prior year. Yet it spent $7.01 trillion, leaving a $1.78 trillion deficit. Through the first 10 months of fiscal 2026, revenue is up $139 billion, or 3%, while outlays are up $309 billion, or 5%. Taxes aren’t the problem… spending is.

2. Money supply keeps climbing. Global money supply reached a new high of $150 trillion in June, up $10.7 trillion (8%) over the past year. Since the COVID-19 outbreak in 2020, global money supply has expanded by $50 trillion, driving consumer prices and interest rates higher with it. With no end in sight to the monetary expansion from global central banks, inflation and interest rates will likely remain stuck in a “higher for longer” regime for the foreseeable future.

3. Big Tech is now more capital-intensive than mining. Alphabet’s (GOOG) capital spending reached $44.9 billion last quarter versus $39.1 billion of cash generated by operations – 115% – producing its first negative free cash flow since its 2004 IPO. Meta (META) spent 98% of its operating cash. Amazon (AMZN) also spent more than it generated in cash over the past year. Meanwhile, the largest gold and silver miners spend less than 50% of operating cash on capex. The AI buildout has turned the most capital efficient businesses in history into mining companies with worse assets. At least a gold deposit produces for decades. A rack of AI chips is written off in five years.

Chart Of The Day… Deere & Co. (DE)

Strong demand for its agricultural and manufacturing equipment has sent shares of Deere & Co. considerably higher over the last month – up 18% in August and 71% since we recommended them to Complete Investor subscribers.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post How’s A 30% Annual Dividend Sound? appeared first on Porter & Co..

This Is Why We Love Big Pharma

Porter & Co. High Conviction does not follow a regular schedule. We only publish it when we believe the recommendation is so certain to be a long-term winner that we’d be prepared to invest 100% of our capital into it.

To be clear, a high-conviction opportunity isn’t necessarily about how much a share price might appreciate – but rather, the probability that a share price will rise steadily over time. Sometimes, these situations may only result in a modest average annual gain… but it comes with far less risk than your average investment.

That’s the opportunity we’re presenting in this issue, with one of the pharmaceutical world’s most well-known and established brands. The company was founded in 1758. But over the last few years, the company has emerged as a Big Pharma leader while at the same time becoming an exciting growth story in the biotech world.

Talk about a Lindy business – which Porter describes as a company with excellent economics and long track records in the marketplace, of at least 20 years… This biotech firm has been at it for 268 years. And it continues to crush it.

Novartis (NYSE: NVS) traces its roots to a Basel, Switzerland, dye-works founded in 1758. The $300 billion market-cap company now sells medicines in around 80 countries, earned a 41.2% operating margin on $14.4 billion of sales in the most recent quarter, and converted $5.6 billion of that quarter’s revenue into cash. It paid shareholders a remarkable $7.8 billion in dividends last year.

Novartis has produced a first-in-class medicine in nearly every modern modality.

• Approved in 2001, Gleevec was the first drug designed to jam the single enzyme that drives chronic myeloid leukemia
• Approved in 2017, Kymriah was the first approved therapy that reprograms a patient’s own immune cells to hunt cancer
• Approved in 2017, Zolgensma delivers a working gene inside a virus to infants born without it
• Approved in 2018, Lutathera (and later Pluvicto) attach radiation to molecules that seek out tumors
• Approved in 2026, Fabhalta slows kidney function decline in IgA nephropathy, blocks part of the immune system’s complement cascade with a twice-daily capsule

The management still guides to 5% to 6% sales growth a year through 2030 because innovation in the pharma industry continues to produce new, higher-quality, patent-protected medicines. Novartis has re-stocked its patent portfolio with gene-silencing drugs. It is currently ramping sales of Leqvio – developed by Alnylam Pharmaceuticals (ALNY) – a twice-yearly cholesterol injection, which sold $1.2 billion in 2025 and $480 million in the June quarter alone, both up 59% year-over-year.

Plus – and this is the big one – we believe Novartis is going to win the race to the first Lipoprotein(a) target. Lp(a) is a cholesterol-carrying particle set almost entirely by the genes a person is born with. Diet does not move it. Exercise does not move it. Statins barely touch it. It causes heart attacks, strokes, and a narrowing of the aortic valve, and no approved drug lowers it.

Novartis enrolled 8,323 patients with established heart disease in Lp(a)HORIZON, the first trial ever run to prove that lowering Lp(a) prevents cardiovascular events rather than merely moving a laboratory number. Results arrive in the second half of this year. Novartis intends to file with the Food And Drug Administration (“FDA”) this year.

Novartis licensed its Lp(a) gene-silencing drug, called pelacarsen, from Ionis Pharmaceuticals (IONS) in February 2019, took worldwide responsibility for developing, manufacturing, and selling it, and has funded the 8,323-patient trial since.

An estimated 18.7 million American adults have established cardiovascular disease, and roughly 21% of them carry Lp(a) above the level Novartis used to enroll its trial – 3.9 million people in the U.S. alone. Only 2% of American cardiovascular patients have ever been tested for it.

In March 2026, the American College of Cardiology and the American Heart Association began recommending that every adult have Lp(a) measured at least once, and that the relatives of anyone with a high reading be tested too.

The three lead Lp(a) drugs are estimated to generate $5.6 billion combined by 2032. One estimate models pelacarsen above $3 billion at its peak. Our own model, built from the diagnosed population upward, produces $4 billion in 2032 annually and $13 billion annually by 2036.

Why Novartis Is High Conviction

If pelacarsen sells on the low side, $3 billion a year, Novartis collects about $2.4 billion of it. Ionis gets roughly $450 million. Royalty Pharma (RPRX) takes the remaining $150 million. Novartis keeps $4 out of every $5. The company that discovered this molecule, that spent three decades learning how to build it, will keep about 15 cents of every dollar it earns. That’s the power of Big Pharma.

And it gets better… Novartis trades at 18x trailing earnings and pays a 3% dividend. The huge opportunity in Lp(a) isn’t priced into the stock.

That’s why Porter will continue to recommend Big Pharma in our Porter & Co Biotechnology portfolio – and that’s why we are making Novartis part of High Conviction now. Novartis is likely to be one of the single biggest growth companies in the world over the next 20 years, despite its current (large) size.

Action to Take: Buy Novartis (NYSE: NVS) up to $165 per share

Porter & Co. Stevenson, Maryland

The post The Long-Legged Leader Of Biotech appeared first on Porter & Co..

Issue#150, Volume#3

And Quite Often Don’t Get You Invited To Appear On CNBC

The Receipts

Why Being Early Might Look Like Being Wrong

Porter Got The Same Treatment

Four Positions, Not One

Why The Rules Matter

Early Isn’t Always Wrong

Presented By: Tuttle Capital Management

3 Things To Know Before We Go…

1. Barclays expects a record El Niño to push commodity prices sharply higher. The National Oceanic and Atmospheric Administration (“NOAA”), the U.S. government’s weather and ocean agency, puts the odds of the strongest El Niño ocean-warming event on record since 1950 at 69% for October through December. Analyst Craig Rye sees commodities including coal, coconut oil, copper, rice, and rubber rising up to 50% over 24 months. Prices are already moving: the S&P GSCI commodity index has gained roughly 50% this year, and copper already trades near a record.

2. The bond market has stopped listening to the Treasury. Thirteen days ago, Treasury Secretary Scott Bessent announced he would at least double the government’s bond buybacks – purchases of older long-term debt meant to push yields down – to at least $4 billion per operation. Long yields dropped for a few hours, then gave it all back. The 30-year sits at 5.25% today versus 5.26% just before the announcement. The 10-year touched 4.79%, its highest since January 2025, after Fed Chair Kevin Warsh’s hawkish Jackson Hole remarks on Friday pushed the odds of a September rate hike above 65%. The composition of that move matters more than the level: of the 76-basis-point rise in the 10-year yield since the Iran War began on February 28, 70 basis points came from real yields – the return investors demand above expected inflation – and just six from inflation expectations. A rate hike will not fix that. Investors are simply demanding more yield to hold $40 trillion of federal debt.

3. September has the weakest S&P 500 average return of any month going back 75 years. But averages hide the distribution – a handful of ugly Septembers (2001, 2008, 2022) drag the number down, while plenty were positive. More relevant for 2026 is the election cycle. In midterm years, September has historically been breakeven, and the two months after it have been among the strongest stretches of the entire four-year cycle. We’ll see if this year is any different.

Chart Of The Day… Veeva Systems (VEEV)

Veeva Systems (VEEV) is a software platform that supports the biotech industry – one of Porter’s tollbooth section of Biotechnology. Veeva shares are up 41% since the August 1 recommendation.

Edit Delete

The next Porter & Co. Biotechnology issue – with new recommendations from Porter – reaches paid-up subscribers on Saturday, September 5. Click here to learn how to get on that list.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post Why Good Investment Ideas Might Start Out Unpopular appeared first on Porter & Co..

Issue#147, Volume#3

He Thought AI Would Eat These Application – But He Had It Backwards

Presented By: The Golden Portfolio

3 Things To Know Before We Go…

1. Leopold Aschenbrenner now sits atop the all-time list of trading losses. The Financial Times ranked the 25 largest trading losses in history. Situational Awareness – the AI-focused hedge fund featured above – takes first place with a $35 billion loss in July, roughly 2.5x the next name on the list, Morgan Stanley’s 2007 subprime mortgage blowup. Archegos, Long-Term Capital Management, and JPMorgan’s “London Whale” all rank further down. The fund held $45 billion at the start of July and about $10 billion by the end, after margin calls – lenders demanding more collateral against borrowed money – forced it to sell its entire public stock portfolio to Ken Griffin’s Citadel at below-market prices.

2. Different presidents, same printing press. M2 money supply has grown from $1.6 trillion at the end of President Jimmy Carter’s term to $23.2 trillion today – a 14x increase across nine administrations of both parties. National debt tells the same story: $1.2 trillion to $39.9 trillion, with $3.7 trillion added in just the first 19 months of the current term. Hard assets like gold, energy, and irreplaceable infrastructure are insurance against the one trend Washington has never broken.

3. A record year for technology stocks. Rampant enthusiasm for the AI revolution has sparked a record year of fund inflows into technology stocks. So far this year, investors are on track to pour a record $216 billion into technology funds, blowing away all previous records by over $100 billion. This has now become one of Wall Street’s most crowded trades.

Chart Of The Day… uniQure (QURE)

Shares of biotech firm uniQure (QURE) have risen more than 100% since being recommended in Porter & Co. Biotechnology for a second time in January – Porter will release his second report since revamping the newsletter on September 5.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post Leopold’s Software Glitch appeared first on Porter & Co..

Issue#146, Volume#3

His 4-To-1 Leverage Just Made His Convictions Worse

Presented By: Tuttle Capital Management

3 Things To Know Before We Go…

1. More than half of young investors have pulled money out of their portfolios to bet on sports. Betterment, an automated investing platform, surveyed 1,000 American retail investors in the spring. Among Gen Z respondents – born between 1997 and 2007 – 52% said they redirected money originally earmarked for investing into sports wagers over the past year, and 26% called sports betting a deliberate part of their long-term financial plan. What could go wrong?

2. American consumers are tapping the brakes. July retail sales fell 0.6% – the steepest monthly drop since May 2025 and well below the +0.1% consensus. The weakness was broad across non-store retailers, including Amazon (AMZN) where sales fell 2.2%, the second-largest decline since July 2021, while auto and parts sales dropped 1.8%. Most telling, control-group sales – the cleanest read on underlying demand that feeds directly into GDP – plunged 0.4%, the worst since January 2025. A stretched consumer is starting to show up in the data.

3. The federal government just posted its largest July deficit on record. The U.S. Treasury reported a $432 billion shortfall for the month – $334 billion of revenue versus $766 billion of spending. Interest on the debt cost $118 billion in July alone, $26 billion more than a year earlier, bringing the fiscal-year total to $1.17 trillion. That is more than the government spends on the entire military, and it is now running even with Medicare. Ten months into fiscal 2026, the deficit stands at $1.8 trillion. Every quarter-point move higher in Treasury yields adds tens of billions to that interest bill as old low-rate debt matures and gets refinanced. Washington cannot afford higher rates.

Chart Of The Day… BWX Technologies (BWXT)

Nuclear-parts provider BWX Technologies (BWXT) has tripled from our 2022 recommendation in Complete Investor – providing the power that powers the AI buildout.

The post Leopold Was Wrong appeared first on Porter & Co..

Today we’re recommending buying additional shares of digital-forensics software platform Cellebrite (Nasdaq: CLBT) via the following trade recommendation:

Action To Take: Buy 200 shares of Cellebrite (Nasdaq: CLBT) up to $13 per share – the recent price was $11.26

Note that this recommendation comes on top of the existing 400 shares of Cellebrite we’ve previously recommended buying, bringing our total recommended position size to 600 shares.

As mentioned in last week’s update, we believe Cellebrite shares are deeply undervalued. We view the 30% drop following its Q2 earnings report as an extreme overreaction to a minor hiccup in its sales growth rate. And after last week’s expiration of our covered-call position on shares of LandBridge (NYSE: LB), which resulted in an additional $7,500 in available cash, we’re recommending reinvesting a portion of this freed-up cash into today’s new trade.

Good investing,

Ross Hendricks
Porter & Co.

The post Trade Alert: Adding To Cellebrite Position appeared first on Porter & Co..

A Business That’s More Efficient Than Japanese Efficiency

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Still, 81 years later, the last of the Pumpkin Bombs is still missing.

You wouldn’t think they’d be hard to find – 10,000 pounds of bright orangey-yellow metal packed with 5,500 pounds of explosive, each 10-foot-long, blimp-shaped Pumpkin was practically visible from space…

They were also a top-secret tactic hiding in plain sight.

Starting in 1944, Manhattan Project scientists built a pile of Pumpkins to exacting specs: they were the same size and weight as Fat Man, the nuclear bomb that would ultimately help end World War II when it fell on Hiroshima.

During the final weeks of the war, American bombers dropped 49 of the rotund Pumpkins throughout the Japanese countryside, as a dress rehearsal for the real thing. The pilots of Enola Gay and Bockscar – the planes that would release Fat Man and its twin, Little Boy – got practice handling the massive weapons, and the Japanese got used to dodging big, fat, oblong bombs. They’d be less likely to notice Fat Man until it was too late.

The Pumpkins weren’t nuclear, but they packed a powerful wallop. During July and August 1945, the pilots of the 509^th Composite Group – a specially-trained Air Force unit who’d trained at a classified base in Utah – strafed Japan with Pumpkins, killing around 400 people and wounding a thousand more.

As the 509^th honed their aim, they flattened schools, shopping districts, random mountainsides, and the moat of the Imperial Palace.

Not to mention a little car company called Toyota…

By 1945, Toyota – founded in 1926 as an automatic loom factory – was already off to a rocky start. After president Kiichiro Toyoda (who changed the company name slightly for good fortune) started building cars in 1937, the Japanese government had quickly commandeered the assembly lines to make war vehicles.

With Emperor Hirohito calling the shots, Toyoda shuttered production on his Model AA passenger car and focused on assembling military trucks. The government offered one-fifth of the payment upfront and the rest of the cash on delivery. It wasn’t the best business model, but it kept the lights on.

Until the Pumpkin fell, anyway.

By August 14, Fat Man and Little Boy had dropped, but Japan was still embroiled in tense surrender negotiations. Bockscar – the Boeing B-29 that had delivered Fat Man on August 9 – had time to kill and Pumpkins to spare.

So one day before the war officially ended, the plane swerved over the main Toyota plant in Koromo and released one of the last Pumpkins of World War II. A quarter of the facility went up in flames and the whole production line shut down, while two-thirds of the workers went AWOL and never came back.

The next day, Emperor Hirohito formally surrendered via radio broadcast.

The U.S. had 66 leftover Pumpkins, but not for long. Air Force crews quietly escorted the remaining orange bombs 10 miles into the Pacific and tipped the barges into uncharted water.

Of the 49 Pumpkins that were deployed, 48 are accounted for. Japanese researcher Koki Nishioka thinks the final missing Pumpkin is nose-down somewhere in the Kobe region, and he’s still walking the hills with his metal detector, searching.

As the smoke cleared, Toyoda – fearing he’d never build cars again – scraped together a few warehouses and repurposed equipment to assemble radios and grind flour. It took two years to rebuild the squashed Koromo factory. In 1947, American occupying forces finally gave Kiichiro Toyoda the green light to start stamping out automobiles once more.

This did not go so well.

Toyota’s production process was clunky at the best of times, and post-Pumpkin, it devolved into chaos. Foremen scrapped huge batches of parts whenever engineers goofed up – which meant it often took up to a year to make minor design updates. On the floor, workmen clashed over whether to use inches, meters, or the traditional Japanese measuring system, while an ongoing steel shortage and violent labor disputes gummed the works up further.

Toyota was routinely losing up to 300 yen on every 3,500-yen vehicle that rolled off the assembly line, which translated to 8% losses per year.

Staggering under the disapproval of his ancestors, Kiichiro Toyoda moaned,

It was hard for me to bear the fact that Toyota was complacently producing such low-quality vehicles. I felt guilty for many years and lived the difficult life of an outcast.

During the late 1940s – as Japan struggled through the continued humiliation of American occupation – Toyota’s ancestors continued to frown. By 1949, the company was unable to pay its wages, heavily in debt and facing possible bankruptcy. A visit overseas to Ford – which was then producing 80,000 units to Toyota’s 40 – did nothing to improve morale.

In 1950, Toyoda resigned as president, washing his hands of the mess he’d created. He took his unluckily-spelled last name with him, which was maybe a good thing…

That June, the flailing Toyota factory received an unexpected rush order from the Pentagon… for 4,679 Model BM trucks. The Korean War had just broken out, and the U.S. needed a close cross-border supplier for army vehicles.

At 3.66 billion yen, the contract was, in the words of the Bank of Japan, “divine aid.” It also posed some problems, such as, how the hell would they get all this done by October?

Enter W. Edwards Deming, the American efficiency expert that everyone would rather forget…

I Don’t Get No Respect

“Japanese efficiency” is a perennial buzzword in corporate culture, but frankly, Japanese industry started out as a hot mess. Japan’s famed efficiency culture comes straight from a Wyoming quality-control expert.

W. Edwards Deming traveled to Japan in 1947 to help conduct a census, and stayed to lecture on statistics. By 1950, he was drawing crowds of business leaders to seminars on his PDCA Cycle, a continuous, rolling checklist of Plan-Do-Check-Act.

The Check part of the cycle was where Toyota kept screwing up. Deming explained that it was counterproductive to inspect products for flaws after they rolled off the assembly line – it was much more efficient to troubleshoot while they were still being built.

Deming hadn’t had much luck suggesting these ideas to hard-headed American car manufacturers – but the Toyota team was eager for any help they could get. Toyota’s new president, Taizo Ishida, and chief production engineer Taiichi Ohno quickly implemented Deming’s ideas. They also added some Japanese flourishes: Kaizen (continuous improvement), Jidoka (automation with a human touch), and Kanban boards, a visual way to streamline production.

Conveniently erasing Deming from the picture (and from their promotional materials), they dubbed the new method the Toyota Way.

The turnaround was instant. Armed with Deming’s quality-control magic, Toyota successfully fulfilled its Korean War truck contract and went on to double its book value and crush production goals over the next five years. (By then, surprise, Kiichiro Toyoda wanted to come back on board as CEO, but he died of a cerebral hemorrhage before he could rejoin.)

As the decades rolled on, the Toyota Way (really, the Deming Way) transformed a pumpkin-flavored pancake into America’s number-one import car, a business that would outperform both Ford Motor and General Motors during the 1970s gas crisis. By the mid-1980s, Toyota was building its own factories on American soil and producing 4 million vehicles a year, a close second to Ford.

By then, Ford and other American companies were reaching out to W. Edwards Deming, begging him to re-design their own assembly lines. Too little, too late…

After a lifetime of snubs from American companies – and watching Japanese companies take credit for his ideas – Deming was too worn out to do much more consulting. He died in the early 1990s, efficient to the end: he left behind a refrigerator full of eggs with penciled expiration dates, arranged oldest to newest.

His quality-control system had a far longer shelf life.

Poached!

In 1986, after becoming the first foreign company to sell 1 million cars in America, Toyota realized it had another valuable commodity to export: good advice.

Hand-picking several of his top efficiency experts, CEO Taiichi Ohno sent them out with his blessing to form a consulting company called Shingijutsu, which would teach all sorts of companies how to implement the mystical Toyota Way.

They were quick to point out that if you really wanted to put the Way into practice, you had to come work at Toyota – but they were happy to teach you how to personalize a version for your own factory… for a hefty fee, of course.

Shingijutsu’s experts traveled to large industrial companies to tutor them in Japanese efficiency, also known as “lean” manufacturing, and by various cult-y sounding buzz phrases like Just In Time and “Six Sigma.” Underneath all the window dressing, it was the same old PDCA Cycle from poor, forgotten W. Edwards Deming.

And cult-y sounding or not, it worked like a charm. During the 1990s, a rash of high-profile companies adopted “lean” principles with spectacular results: Motorola saved $16 billion and eliminated 90% of its semiconductor defects, General Electric reduced production time on its engines by 30% and moved 50% more inventory off the floor, and on and on. Today versions of the Toyota Way are still maximizing efficiency at some of the largest Fortune 500 companies, including Boeing, Caterpillar, and Deere & Co.

The 40-year-old company we are recommending in this issue of Best Buys is one of them…

A $150 billion science and tech juggernaut, this company credits its success largely to a personalized version of the Toyota Way that its CEO learned from Shingijutsu’s traveling experts. Happily for us, its performance has been unfairly overlooked, making it a world-class business at an ideal entry point.

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1. Danaher (NYSE: DHR)

Danaher (NYSE: DHR) is a science, medicine, and technology firm that owns and operates dozens of specialized companies.

Why We Recommended Danaher

With a market cap of $150 billion, Danaher owns nearly 20 companies across three industry segments, generating close to $25 billion in annual revenue.

Growing through acquisition is a fairly common practice – in fact, there are more than $2 trillion in mergers and acquisitions (M&A) every year. But three-quarters of these M&A transactions fail, and wind up destroying shareholder value.

Danaher defies these odds because it doesn’t just “buy” a business. It ensures its money is put to good use. To do this, inspired by Japanese efficiency, it created a playbook for transforming good companies into great ones – it is part of the company’s guiding philosophy called the Danaher Business System. It is a systematic way to build efficiencies for supercharging profit margins and returns on capital, regardless of the business model or industry.

Since its founding in 1984, Danaher’s success following this approach is reflected in its financial performance. Over its 40 years, the company has compounded shareholder capital at an incredible 21% per year. That’s nearly twice the S&P 500’s compounded annual return of 11.6% over the same period.

Why Danaher Is A Best Buy

Danaher has fallen out of favor after a post-COVID hangover from the boom and subsequent bust in sales of respiratory testing equipment. But now, after two years of destocking excess inventories, Q1 2026 bioprocessing equipment orders grew more than 30% year-over-year (“YOY”) for the first positive order growth in nearly two years.

The recovery that began in Q1 continued into Q2, with Danaher’s net income up 60% YOY to $1.23 per share. Importantly, the company’s measure of core revenue, which excludes respiratory testing, increased by 4.5%, indicating that the core demand for bioprocessing equipment and services is returning to growth after the multi-year post-COVID slump.

Management raised its full-year 2026 outlook for earnings per share to $8.53, up from a prior forecast of $8.45. Meanwhile, the business continues to generate a healthy amount of cash, with free cash flow up 15% YOY to $1.3 billion in Q2.

With 80% of revenue coming from a stable source of recurring orders of consumables, reagents, and service, the core business remains stable and recession-resistant. Trading at around $200, we’re getting a chance to buy into this long-term compounder at 23x earnings, just as the business reaches an inflection back to consistent earnings growth.

Action to Take: Buy Danaher (NYSE: DHR) up to $250 per share

2. Versamet Royalties (Nasdaq: VMET)

Versamet Royalties (Nasdaq: VMET) is a fast-growing precious metal royalty company.

Why We Recommended Versamet Royalties

Versamet Royalties (Nasdaq: VMET) is one of the fastest growing precious metals royalty companies in the world. Since 2022, it has increased royalty production volumes from zero to 10,000 gold-equivalent-ounces (“GEOs”) and is on track to double in size this year to 20,000–23,000 GEOs.

Royalty and streaming companies are the tollbooths of the mining world. Rather than operating mines – with all the capital expenditures, labor, and operating risks that entails – royalty companies provide upfront financing to miners in exchange for a percentage of future production (royalties) or the right to purchase metal at a fixed, below-market price (streams).

Led by CEO Daniel O’Flaherty, who holds one of the greatest track records in the industry, Versamet has been compounding at 50% annually across every meaningful metric – revenue, cash flow, production – without issuing equity or having to invest in mine development. Since the company began trading on the Nasdaq just six months ago, on March 6, most investors have not heard of it, so the stock is still cheap. At around $10 per share, the business trades at a market cap of $1.1 billion. And based on current gold prices of $4,500 per ounce, we expect the business will generate close to $100 million in revenue this year, with staggeringly high operating margins above 90%.

We see several catalysts ahead that will unlock significant shareholder value, including a major acquisition of a royalty stream on one of Canada’s most promising new gold mines. As more catalysts begin to unfold, and as more analysts begin covering Versamet and it becomes eligible for index inclusion, this will likely lead to a significant re-valuation of its shares.

Why Versamet Royalties Is A Best Buy

On August 13, Versamet reported its fourth consecutive record quarter since going public. Revenue of $23.7 million was up nearly fivefold YOY, GEOs hit a record 5,255, and the cash cost margin reached 93%. Management reaffirmed 2026 guidance of 20,000 to 23,000 GEOs. And by 2028, once Skeena Resources’ Eskay Creek open-pit, gold/silver mine in British Columbia reaches production, Versamet’s output climbs past 30,000 GEOs on our conservative base case, with analyst consensus near 40,000. That’s a quadrupling in four years – without operating a single mine or spending an additional dollar of capital on expansion.

Eskay Creek is Versamet’s cornerstone acquisition and is the reason we’re elevating VMET shares now. In April, Versamet paid $360 million for a 3.52% life-of-mine gold stream on Eskay Creek – the restart of what was historically one of the highest-grade precious metals mines on Earth, producing 3.3 million ounces at 45 grams per tonne during its 1994–2008 run in British Columbia’s Golden Triangle. Operator Skeena Resources has construction 62% complete, fully permitted, with first production targeted for Q2 2027. Once running, Eskay Creek sends Versamet more than 10,000 ounces of gold per year – roughly $45 million in annual revenue at current gold prices – and Versamet funded 94% of the purchase with debt, issuing just 2% in new shares.

Versamet trades at 10x 2027 estimated cash flow. Its royalty peers – Franco-Nevada (FNV), Wheaton Precious Metals (WPM), Triple Flag Precious Metals (TFPM), and the rest – average 18x to 20x. A re-rate to the bottom of the peer range roughly doubles the stock – and that’s before any credit for rising gold prices, which flow almost entirely to the bottom line at a 90% margin.

The mechanical buyers are already arriving. Daily trading volume has risen roughly tenfold since late 2025. MSCI added VMET to its Small Cap Index in May. And the company expects to meet inclusion criteria for GDXJ – the most widely held junior gold exchange-traded fund (“ETF”) – in the second half of this year. Index inclusion forces buying, regardless of price.

Action to Take: Buy Versamet Royalties (Nasdaq: VMET) up to $24 per share

3. Salesforce (NYSE: CRM)

Salesforce (NYSE: CRM) is the world’s leading cloud-based customer relationship management platform.

Why We Recommended Salesforce

Salesforce (NYSE: CRM) is a global leader in cloud-based software, specializing in customer relationship management solutions. With a $140 billion market cap, it generates just over $40 billion in annual revenue. Salesforce empowers businesses of all sizes to connect with customers in innovative ways through its integrated online software platform. The company’s core offerings include tools for sales, customer service, marketing automation, analytics, and application development. These products are all designed to enhance customer engagement and streamline business processes. With a strong focus on digital transformation, Salesforce serves industries ranging from small startups to Fortune 500 enterprises.

Salesforce has 72,000 employees worldwide, serving 150,000 customers. Company revenue has increased at a compound annual growth rate of 24% since 2004, when shares went public. In fact, its revenue has never been down YOY – even during the 2008 Global Financial Crisis or the COVID pandemic.

Why Salesforce Is A Best Buy

In a single trading session in February, $285 billion in market cap evaporated from enterprise software stocks like Salesforce. At its April 10 low, the iShares Expanded Tech-Software ETF (IGV) had fallen 35% from its 2025 high.

The consensus explanation was that artificial intelligence (“AI”) is eating software – and that software companies’ days are numbered. But it’s not as simple as that: not all software companies are dying, and the companies that survive this paradigm shift will be more valuable than the old ones ever were.

Salesforce has seen its stock hit heavily recently – down 22% year-to-date – largely driven by this investor anxiety regarding how its traditional user-based licensing model will survive as AI replaces human roles. In response, Salesforce has pivoted its pricing structure toward consumption-based billing, charging per automated task completed rather than per human worker.

Its plan seems to be working, as Salesforce is performing strongly: for fiscal Q1 2027, released on May 27, revenue rose 13% YOY to $11.1 billion, and EPS of $3.88 beat consensus estimates by 24%, signaling that the company’s past cost-cutting efforts are heavily falling to the bottom line. Crucially, its critical growth catalyst, Agentforce, crossed the $1 billion annualized recurring revenue (“ARR”) milestone, proving real enterprise adoption. ARR is up roughly 205% YOY, proving the enterprise adoption thesis.

Management returned $27.5 billion to shareholders during the quarter, highlighted by a $25 billion accelerated share-repurchase program. While the enterprise software landscape remains sluggish, Salesforce’s aggressive buybacks and embrace of AI will continue to drive its growth.

Salesforce reports Q2 2027 earnings on August 26, with guidance for revenue around $11.3 billion (up about 10% YOY) and consensus estimates for EPS near $3.10.

At roughly $200 per share, Salesforce trades at less than 15x forward earnings. While shares have rallied roughly 25% since we recommended Salesforce as a Best Buy in July, it’s still trading at a multiple that prices it as a disruption victim. That discount will shrink as Salesforce continues to execute.

Action to Take: Buy Salesforce (NYSE: CRM) up to $251 per share

Every month, we highlight three current recommendations that are at an attractive buy point, and we include those with the best buying opportunity as our Best Buys. While we sometimes alternate which companies we list as our Best Buys, removing a stock from the list does not necessarily mean we no longer recommend it – nor does it imply a recommendation to sell shares in that company once it is no longer a Best Buys. It’s only that the new picks present an even more compelling investment opportunity.

Important: Porter & Co. intends to invest $500,000 of its own capital in securities in our Best Buys, including several of the recommendations written about above. Porter & Co.’s decision to purchase these stocks should not be considered personalized financial advice. Probably not surprising to you, but if we like a stock or bond, we buy it. Some people don’t like that, while others think it’s a good sign if the analyst has skin in the game. It’s also a good idea to consult with an investment professional before purchasing any securities – maybe even run it by your mother or golfing buddies. And there’s more… Porter & Co. does not recommend positions in unregulated securities because there are plenty of good ones that are regulated.

Porter & Co.
Stevenson, Maryland

The post August 2026 Best Buys appeared first on Porter & Co..

Issue#145, Volume#3

What’s Replacing The Traditional 60/40 Stocks/Bonds Portfolio

Three Times Is Not Bad Luck

Porter Had Been Saying It Already

Why The Long Bond Breaks

Underwriters, Not Treasuries

How It Works Inside The Fund

A Better Definition Of Safe?

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Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. Brownstone is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.

3 Things To Know Before We Go…

1. The riskiest junk bonds have stopped following the stock market. CCC-rated debt – the lowest tier of junk – is the corner of the bond market that normally tracks stocks most closely, moving about twice as much per point of S&P move as safer BB-rated paper. Since January, the extra yield investors demand to hold CCC debt instead of Treasuries has widened dramatically as the S&P 500 has continued to rise to new highs. The last time the two diverged like this preceded the 2022 bear market in stocks.

2. Axon lands three new deals in three new channels. In one week, Complete Investor recommendation Axon Enterprise (AXON) earned a 10-year, $40 million deal to put body cameras on every correctional officer in Maryland’s state prisons, then the Transportation Security Administration (“TSA”) announced that Axon will supply counter-drone sensors at U.S. airports, and the company also delivered an anti-drone system to Bulgaria – its first to a European military. Correctional facilities, federal civilian aviation, and European defense are all channels Axon didn’t serve two years ago. Shares are up 20% since our July 18 recommendation.

3. Broadcom adds to debt-fueled AI vendor financing woes. Custom chipmaker Broadcom (AVGO) announced yesterday talks with a group of lenders to raise up to $100 billion in debt for the purchase of its chips. The credit will be extended to Anthropic and other companies investing in AI computing power, with Broadcom potentially guaranteeing up to $70 billion of the debt, according to Bloomberg. The credit market reacted by sending Broadcom’s credit default swap – an insurance contract that pays out in the event of a default – to a new high of 80 basis points, up from just 10 basis points in June. The bond market is becoming increasingly concerned about the growing use of debt and circular financing arrangements fueling the AI boom.

Chart Of The Day… Franco-Nevada (FNV)

Franco-Nevada (FNV) has long been Porter’s favorite gold royalty company – the most capital efficient business model in the sector, with the best capital allocators – and since we originally added it as a Best Buy in late 2023, shares have gained 142%.

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Every month we select three Porter & Co. recommendations that we think are at a particularly attractive buy price. Our next batch of Best Buys goes to paid-up subscribers tomorrow, August 22. To see what the team has selected, click here to learn more.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post The Day “Safe” Stopped Feeling Safe appeared first on Porter & Co..

Editor’s note: For the month of August, we’re shifting the publication schedule for The Trading Club to bi-weekly updates. We will post our next update on September 4, after which we’ll return to our regular weekly publishing schedule.

The value of The Trading Club tracking portfolio settled at $134,153 as of Thursday, August 20 – up 34.2% since the May 30, 2025, inception date (see the detailed portfolio snapshot below). We made no trades this week.

In this issue we provide an update on a covered-call position expiring today, review the latest earnings report from one of our software holdings, and address a recent subscriber question in the “Mailbag.”

Update On LandBridge Covered Call Expiring Today

The following covered-call contract on our 100-share position in West Texas land leasing company LandBridge (NYSE: LB) is set to expire at the close of trading today:

One LandBridge (NYSE: LB) $75 covered call, expiring August 21, 2026

No action is needed as we plan to continue holding the position through today’s expiration date.

With shares of LandBridge trading just under $90, the option is likely to expire in-the-money at the close of trading today. In this scenario, our shares will get called away, meaning our broker will automatically sell our 100-share position at the $75 strike price after the close of trading today.

Conversely, if shares fall below the $75 strike price by the close of trading today, the option will expire out-of-the-money and we will retain our 100-share position.

Either scenario is an acceptable outcome for us. Let’s briefly review the latest quarterly results and the valuation of the business that leads us to this conclusion.

LandBridge reported excellent Q2 results on August 5, including revenue of $67 million, up 41% year-on-year (“YOY”), while net income increased 68% YOY to $31 million. The company is benefitting from the resumption of drilling activity across the Permian basin, as the major drillers like ExxonMobil (XOM) and Chevron (CVX) add new drilling rigs in response to higher oil prices. And with oil production on the rise across the Permian, this is leading to greater volumes of produced water, translating into higher royalty payments for LandBridge.

Based on the steady growth in drilling activity, the company reiterated its 2026 outlook for EBITDA (earnings before interest, taxes, depreciation, and amortization) to reach $220 million. It also announced advanced discussions with seven counterparties representing over 10 gigawatts of power and data center capacity for land leasing deals. LandBridge CFO Scott McNeely characterized these as projects with signed documents undergoing diligence or agreements currently under negotiation, rather than preliminary outreach. He also noted that the counterparties include a mix of hyperscalers, engineering, and procurement companies, as well as power generation businesses.

Management expects that “multiple” of these negotiations could convert into firm leases with revenue beginning to flow in by the end of next year, although no formal deals have yet been announced. But that hasn’t stopped the market from beginning to price in this potential future upside, as the shares have enjoyed a significant valuation re-rating in recent weeks.

At just under $90 per share, LandBridge trades with a $7.9 billion enterprise value (“EV”), putting its valuation at a relatively rich 36x EV/EBITDA ratio. That’s a 15% premium to Texas Pacific Land (TPL), currently trading at 31x EV/EBITDA, with both companies growing at similar rates.

While the business is performing well, we are ok with taking profits on the stock. At today’s stretched valuation, we believe investors are paying up for shares based on the promise of future data center deals that have yet to come to fruition. That presents a risk of a valuation de-rating in the event that these deals fail to materialize, or take longer to begin generating revenue than the market is currently pricing in. For now, we’ll continue monitoring the story and may re-enter the position should the opportunity present itself.

In the meantime, we plan on reinvesting a portion of the freed-up cash we expect to receive if the shares close above the covered-call option strike price today.

And for that, we turn to the latest opportunity provided by what we view as an over-reaction to a minor hiccup in the quarterly report from one of our favorite software stocks.

Cellebrite’s Minor Sales Hiccup Creates Buying Opportunity

Digital forensics platform Cellebrite (Nasdaq: CLBT) delivered modestly disappointing Q2 results on August 13. The company generated $131 million in Q2 revenue, or just shy of the $132 million analysts estimated, while earnings per share of $0.11 was in line with expectations. Management also reduced its forecasted revenue for the full year down by 3% to $555 (at the midpoint of the guidance range). However, despite the revenue downgrade, management increased its forecast for adjusted EBITDA up by 3% to $156 million for 2026.

The primary cause of the sales weakness was attributed to a slower pace of deal closing for the company’s cloud-based software offerings, which were stymied by unexpected regulatory steps. This resulted in a slightly elongated sales cycle, although no deals in the company’s sales pipeline were lost, as we’ll discuss in greater detail below.

In isolation, we viewed the revenue weakness in Q2 and downgrade in management’s outlook as modest disappointments. But the company also announced the unexpected retirement of CEO Tom Hogan, to be replaced by the former President of Products and Technology, Shiv Ramji, effective immediately.

While it’s never good to see an earnings miss followed by a guidance cut, it’s even worse when accompanied by a sudden shakeup in leadership. We suspect it was this confluence of negative bits of news that drove the stock down 30% following the report, with some investors likely viewing the sudden CEO change as evidence of deeper problems within the company. However, after looking closely through the numbers and the management commentary from the earnings call, we believe the share price sell off was an extreme over-reaction.

Let’s start by setting the stage for the regulatory obstacles the company is facing. As we’ve written about previously, in order to legally sell cloud-based software to any agency of the U.S. federal government, the vendor must first secure approval from the Federal Risk and Authorization Management Program (“FedRAMP”).

Cellebrite secured FedRAMP approval on May 6, and management expected an immediate boost in sales from a healthy backlog of customer demand for its new cloud-based offerings starting in Q2. However, even after securing this approval, the company faced a new and evolving set of requirements that involved “multiple waivers, security reviews, and other other administrative approvals” in finalizing several of its large-scale cloud deals in Q2. CFO David Barter provided the following commentary on the earnings call that put the scope of these delayed deals into perspective:

When you put the quarter in context, we signed and took down orders probably well north of 1,000. In the end, it kind of came down to four, and it was four that crossed the line, and it was four that involved cloud. One in particular involved a platform. You might recall one of these deals we alluded to last time where they actually called us before we had FedRAMP approval. Even they were a little bit surprised about the changing procurement requirements when you get into cloud and AI and the approvals that we had to secure.

In other words, we’re talking about just four deals that contributed to the unexpected weakness in Q2. And importantly, none of these deals were lost, but merely delayed. Chief Revenue Officer Marcus Jewell noted on the call that $4 million worth of sales that were delayed in Q2 have since been closed as of the day of the conference call.

Now admittedly, a slower pace of deal closings will act as a modest drag on the rate of revenue growth over the next couple of quarters. However, the impact here should also be relatively muted over the long-run, with management estimating that the sales cycle was elongated by approximately six weeks for its cloud-based software sales.

Even with this slower sales cycle, the 3% decline in full year revenue for 2026 is far from a thesis-killer, with the company still on track to increase revenue by 17% this year at the midpoint of its updated guidance.

The bottom line is that we saw nothing in the report or in management commentary that should lead to any meaningful impairment to the long-term outlook for the business. Conversely, we saw signs of ongoing strength in the core business from the improving net revenue retention rate, which increased by two percentage points over Q1 to 117%. This tells us that the retention and expansion within the existing customer base actually improved sequentially, even as the growth rate from new sales slowed down from an elongated sales cycle.

We’ll also point out that there’s a flipside to the stringent regulatory requirements Cellebrite faces in selling cloud-based software to government agencies: it further widens the competitive moat around the business. Cellebrite is the only company among its peers that has achieved FedRAMP approval, which management described as a “long and tortuous process” on the Q2 earnings call. So as difficult as it is for the incumbent (Cellebrite) to navigate this complex regulatory environment, this also creates an incredibly high barrier to entry for smaller rivals that have fewer resources, and less of a track record in working with regulators, to overcome.

Meanwhile, the final thing we’ll point out is that ultimately its earnings and free cash flow (“FCF”) that determine the worth of a business, not the top-line revenue growth rate. And on this last point, we actually saw an improving outlook from the Q2 report, as management upped its earnings outlook by 3% for the full year while reiterating its 30% FCF margin target. This is a result of the company successfully scaling up the business while keeping its costs stable, including headcount – which remained unchanged through Q2 relative to the end of 2025, even as the business grows at mid-teens rates. Looking ahead, management noted that it is “increasingly optimistic about our potential to deliver the next step-up in our profitability and FCF in 2027 as we demonstrate that we can operate the business without material expansion of the headcount.”

Putting it all together, we see a business on track to increase revenue at a healthy mid-teens annual rate while generating approximately $167 million in FCF this year. At a recent price of around $11, the business trades at a market capitalization of $2.8 billion, with a pristine balance sheet that contains just over $500 million in net cash. That translates into an EV of $2.3 billion, and a valuation ratio of just under 14x EV-to-FCF compared with over 33x for the S&P 500.

Given Cellebrite’s dominant competitive position, wide structural moat, and high cash flow margins, we see no reason why this business should trade at a market discount. We suspect investors have grown frustrated with the shares after a year and a half of setbacks, starting with DOGE-related fears in early 2025, the perceived AI threat to all things software earlier this year, and now a guidance cut and CEO reshuffling. But simply looking at the objective business fundamentals, we see a deeply discounted stock where the underlying customer base remains sticky and a solid growth outlook.

Assuming the worst is behind it and the company achieves the latest guidance set out by management, we see no reason why the shares won’t compound in line with revenue growth going forward, at a high-teens rate. Plus, we also see significant upside potential from the valuation re-rating higher towards a market multiple, which would more than double the share price alone.

Our plan is to take advantage of this opportunity to increase our position in Cellebrite, using a portion of the freed-up cash from the LandBridge option expiration, assuming the option expires in-the-money at the close of trading today. That cash will be available for investment on Monday morning, at which point we’ll issue a new trade alert.

Next, we’ll show each position in the portfolio broken down by trade type.

Portfolio Review

The table below shows all current holdings as of the close of trading on Thursday, August 20:

A few notes on how to read and interpret this portfolio table.

Please pay special attention to the “Action” column, where we specify whether each trade is a “buy” or “sell to open” transaction.

Next, the position size for each trade is equal to the current value of the position, with the exception of the cash-secured puts. In the case of the cash-secured puts, we define the position size as the total value of our future commitment to purchase 100 shares for each contract. This number is calculated as follows:

Position size = number of contracts x 100 x put strike price

We use this number because it accurately reflects our total capital commitment, and thus our total risk exposure on the trade.

For example, in the case of the Celsius Holdings (Nasdaq: CELH) $30 puts, the position size equals 2 x 100 x $30 = $6,000. We use this number because it accurately reflects our total capital commitment, and thus our total risk exposure on the trade.

To see the current profit/loss across each open position and other details, please see the live snapshot of our tracking portfolio at the end of this update.

We have compiled a summary overview of the latest quarterly trades released on June 22, which you can find here. Since then, we have recommended the additional trades listed below:

1. On July 17, we recommended purchasing shares of Novo Nordisk (NYSE: NVO), which you can find here
   
2. On July 21, we recommended purchasing shares of Hims & Hers Health (NYSE: HIMS), and we provided the analysis for the company on July 24, which you can find here

Next, we address a recent question from the “Mailbag”

Mailbag

Please note that nothing we write should ever be considered individual investment advice, as we are not licensed to provide such guidance. This material is for educational purposes only, and we recommend consulting with a licensed financial advisor for individual investment advice.

Today’s “Mailbag” letter comes from a subscriber with a question about our position in Celsius in the context of the recent sell recommendation of the stock in the Porter & Co. flagship advisory, Complete Investor.

Ross Comment: Yes, we continue recommending holding the existing positions in Celsius Holdings (Nasdaq: CELH) in The Trading Club for the reasons described in our prior update on August 7.

With different analysts running the different publications at Porter & Co, we will sometimes have differing opinions on the same stocks. Plus, the option trading strategies in The Trading Club means we will sometimes have slightly different objectives versus a publication like Complete Investor that’s catered toward a buy-and-hold strategy.

For now, we’re happy to stick with our current strategy of selling options on Celsius, as we believe the downside risk is limited at current prices, while the elevated option premiums offer an attractive source of steady income potential.

If you have any questions or feedback, The Trading Club Forum is the best chance to get a quick response from our team.

Alternatively, you can always email us at mailbag@porterandcompanyresearch.com.

Good investing,

Ross Hendricks
Porter & Co.

The post Trading Club Update – Week Of August 17, 2026 appeared first on Porter & Co..

Issue#144, Volume#3

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How The Retailer Lost The Customer Who Made It Profitable

Target has a new chief executive, an “acceleration office,” 30 new stores, 130 remodels, and price cuts on more than 10,000 items. What’s changed? After two years, costs continue to grow – Selling, General, And Administrative (“SG&A”) is now 21.6% of revenue – and profits continue to fall – operating margin is 5.9% down from 6.4%, net income is $1.12 billion down from $1.19 billion.

Target went from 1,926 stores and 243.3 million square feet to 1,995 stores and 250.5 million square feet, while merchandise sales per square foot fell from $430 to $410, down 4.6% before inflation – 69 additional stores produced less sales per foot.

Another sign of brand decline: credit card profit sharing, the fee Target collects on its co-branded card, fell from $710 million to $522 million. Fewer affluent cardholders spending on credit.

Target has seen a 3.6% traffic increase. Two quarters of rising traffic is evidence that something is changing. The numbers tell me it’s more people responding to Target’s discounting because gross margin and operating margin continue to decline (compared to a real baseline, not a liquidation quarter).

Target is buying traffic with lower prices. It has reduced prices on more than 10,000 items in the last year. Average transaction price was flat this quarter and fell 0.4% for the full fiscal year, despite inflation above 3%.

Target is completing its conversion into a discount chain — more customers, cheaper carts, thinner margins, and a store experience that pushes the remaining affluent shopper toward an app.

Competing on price means competing with Walmart, which has far greater scale, and Costco, which competes with less markup, and Dollar General, which has lower cost per square foot.

Target carries the cost structure of a lifestyle retailer and the assortment of a discounter. That’s the Kmart strategy. And it doesn’t work.

There’s one wildcard that could enable Target to continue to tread water for longer than I expect.

Target sells advertising (Roundel) to its vendors. The incremental cost of those advertising dollars is close to zero. It also has Target Plus – a third-party marketplace where Target books a commission. And Circle 360 is the paid membership program at Target. Management reported Roundel gross billings were up nearly 20%, Target Plus merchandise volume was up more than 40%, and Circle 360 membership revenue up over 40%.

Target discloses advertising revenue in its annual filings:

• Fiscal 2023: $404 million
• Fiscal 2025: $649 million
• Fiscal 2026: $915 million

These are impressive numbers. But advertising is only 0.87% of total revenue.

To add one percentage point of operating margin, Target needs $1.05 billion of incremental operating profit. Advertising would have to more than double, at zero incremental cost, to recover a single point of the three and a half points of operating margin lost since fiscal 2021.

It’s a very important part of its business and it’s something that Kmart didn’t have. Is it enough to save the business? I don’t think so.

Capital spending is up 30% this year to $5 billion for the year. Target continues to invest heavily into its core retail business even though it continues to report falling sales per square foot. Shareholders are funding a bet that remodeled stores attract a customer who has already installed a shopping app and won’t go Target again. That strategy isn’t working: Target has added 69 stores over the last four years. And sales per square foot continue to fall.

Frankly, I think these decisions and the management’s handling of the tariff refund accounting show they’re delusional. But if you doubt me, just consider that they are also saying Target will resume repurchasing its own shares in the back half of this year.

Operating cash flow over the last 12 months was $8.72 billion. Remove the $994 million refund and it is $7.73 billion. Spend the promised $5 billion of capital and pay the $2.07 billion dividend, and $661 million remains for the entire year.

What Target must do is rebuild its brand, its merchandising, and its shopping experience to recapture its core, high-margin user. So far it hasn’t found that formula. And with so much competition from Costco, Amazon, Walmart, and Dollar General I don’t believe that’s possible.

Tell me what you think of today’s Daily Journal: porterstansberrydirect@gmail.com

Good investing,

F. Porter Stansberry
Stevenson, Maryland

P.S. For 50 years, market predictions offered up at The New Orleans Investment Conference have become market reality. This year, Porter has been invited to address the prestigious event, taking place October 28 to October 31. To learn more about the legendary conference and to attend, follow this link…

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Presented By: MyWallSt

3 Things To Know Before We Go…

1. Stock dividends can no longer compete with Treasury bonds. In July 2016, 63.4% of S&P 500 companies paid a dividend yield above the 10-year Treasury note – meaning a shareholder collected more annual income per dollar invested than a government bond paid. That was the highest level since the data began in 1972, excluding the brief COVID crash. A decade later, that figure is 3.85%, the lowest since May 2007 – just 19 companies out of 500. Both sides of the comparison moved: the 10-year yield finished July at 4.75% versus 1.46% 10 years earlier, while the S&P 500’s own dividend yield was cut roughly in half, to about 1%, as index weight shifted toward technology companies that return cash through buybacks (or not at all).

2. Walmart earnings signal more consumer stress. Walmart (WMT) reported its weakest same-store-sales growth since 2020 in its Q2 results this morning, at 2.6%, significantly undershooting the 3.7% analyst estimates, sending shares 10% lower. Management cited stretched consumer budgets as the cause of sluggish demand, and this comes after U.S. retail sales unexpectedly dropped 0.6% in July. It also follows the poor July payrolls report that showed U.S. jobs declining by 23,000 for the month. The signs of a widespread consumer slowdown are mounting.

3. The Treasury’s bond-market rescue has already faded. At 8:20 am ET Wednesday, the 10-year Treasury yield was 4.68%. Minutes later, the U.S. Treasury announced it would at least double its “liquidity support” buybacks in the 10-to-30-year part of the market – from $2 billion per operation to at least $4 billion – starting September 9. The 10-year fell to 4.64%, and the 30-year dropped nine basis points to 5.19%, a day after touching its highest level since 2007. By this morning, the 10-year was at 4.71%, above where it started, and the 30-year yield had erased its entire decline. The arithmetic explains why. A buyback creates no new money: Treasury repurchases older bonds using cash raised by selling new debt, mostly short-term bills. It swaps maturities, it doesn’t retire debt. Total buybacks this quarter are capped near $38 billion versus $739 billion of net new borrowing. Markets read the move as a step toward holding long-term rates down. But for now, at least, the size isn’t there.

Chart Of The Day… Veeva Systems (VEEV)

Biotech software leader Veeva Systems (VEEV) has seen its share price rise 24% since Porter recommended the company in the newly revamped Porter & Co. Biotechnology on August 1. His next biotech report reaches paid-up subscribers on September 5.

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To become a paid-up subscriber and see what Porter will recommend next, click here.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post Target’s Tariff Refund Isn’t A Turnaround appeared first on Porter & Co..

Issue#143, Volume#3

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For Those Who Aren’t Careful, It’s Total Amputation Without Anesthetics

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Presented By: Porter & Co.

3 Things To Know Before We Go…

1. Diesel prices are surging. The pump price hit $5.47 a gallon Tuesday, up 8% in a month and just 35 cents below the June 2022 record, as the Iran war and Ukrainian drone strikes on Russian refineries pull supply offline. The premium diesel commands over crude – the refiner’s margin – hit a record $100 a barrel, triple last year’s average. Farmers, truckers, and heating-oil buyers have no substitute.

2. The cockroaches are coming for private credit. Loans on non-accrual status – meaning the borrower has stopped paying or is about to – hit 2.8% at the 20 largest publicly traded private-credit firms in Q2, the highest level in a decade. The riskiest lending migrated into the $2 trillion private-credit channel where nothing gets marked until someone is forced to mark it. Now the marks are being forced. Major funds are taking writedowns and selling loans at discounts. First came the redemption gates – investors trying to get out. Now come the non-accruals – borrowers failing to pay.

3. Three times as many stocks are hitting one-year lows as one-year highs. On Tuesday, 173 securities listed on the New York Stock Exchange closed at their lowest price in 52 weeks, versus just 57 closing at their highest. The S&P 500 finished the same session 1.4% below the record close it set on August 13. In the 15 prior cases since 1928 when the S&P 500 sat within a week and 2% of a record high while new lows ran three times new highs, the index averaged a 2.8% loss over the following 12 months and finished higher only a third of the time. At their worst point during those years, stocks were down an average of 16%.

Chart Of The Day… Presidential Debt

Federal debt crossed $40 trillion this week. Nearly three-quarters of that total was added by just four presidents: Bush 43 (+$4.4 trillion), Obama (+$9.6 trillion), Trump’s first term (+$7.4 trillion), and Biden (+$8.3 trillion). Two Democrats, two Republicans – and Trump’s second term has added roughly $4 trillion more in just 19 months. Both parties are responsible for our debt crisis.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post Follow The Flow Of Money appeared first on Porter & Co..

Selling Coupang: Regulatory Risk Outweighs Potential Returns

We recommend selling shares of Coupang (NYSE: CPNG), which we added to Complete Investor in April 2024.

In November, Coupang – South Korea’s dominant e-commerce platform – disclosed the largest data breach in the country’s history. The personal information of 33.7 million customers, roughly two-thirds of South Korea’s population, was exposed. Customers canceled memberships, executives were summoned before the National Assembly, and Coupang’s Chief Executive of the Korea operations resigned. Shares, which traded above $33 before the breach, have been cut in half.

To its credit, Coupang has largely restored consumers’ faith. Customers are back to pre-breach levels, underlying customer spending is up approximately 16%, and revenue grew 10% in constant currency last quarter. However, the Korean government continues its investigation – and scrutiny has broadened beyond the breach itself.

In June, the regulators imposed a record 624.7 billion won ($412 million) privacy fine against Coupang – and roughly a third of it covered separate violations involving behavioral data collected from outside websites and apps. Also in June, the National Tax Service issued notices seeking roughly $208 million in additional taxes, penalties, and interest following a special audit of transactions among Coupang’s Korean subsidiaries. A Fair Trade Commission case targeting Wow membership bundling – open since 2024 – now heads toward a scheduled September hearing, with Korean press floating penalty estimates in the hundreds of billions of won. Coupang is contesting the fine and disputing the tax notices, which doesn’t shrink the risk so much as extend it: years of litigation against your own government is an uphill battle.

There’s a real risk this regulatory battle has no end in sight. The decisive variable in this position is now Korean domestic politics – a dispute that has already drawn formal oversight from the U.S. House Judiciary Committee, whose July report sharply criticized South Korea’s treatment of Coupang, and has become a point of friction in broader U.S.-Korea trade relations. A regulatory campaign with political momentum in a market that supplies more than 90% of revenue is too much for comfort.

We’re closing the position at approximately $16 per share, a 13% loss from our $18.32 entry more than two years ago. If Seoul’s campaign genuinely concludes, we’d look at this exceptional business again. Until then, we view the risk as too great relative to the potential reward.

Action to Take: Sell Coupang (NYSE: CPNG)

Selling Celsius After Core Brands Disappoint

We also recommend selling shares of Celsius Holdings (Nasdaq: CELH), which we added to Complete Investor in March 2024.

The energy-drink maker delivered disappointing Q2 results on August 6, with revenue of $818 million coming in $52 million below the consensus analyst forecasts. Meanwhile, earnings per share (“EPS”) of $0.36 also disappointed relative to the $0.42 consensus estimate for the quarter.

The big concern came from unexpected weakness in sales of the company’s flagship Celsius brand, where revenue declined 12% year-on-year (“YOY”), as well as a 13% drop in Rockstar sales. On the positive side, these declines were offset by a 21% YOY increase in Alani Nu sales, leading to overall revenue growth of 10.6% versus the prior year.

The declines in Celsius and Rockstar jarred investors, sending shares plunging 20% yesterday. The stock has since rebounded starting on August 7, after news broke that the founder of Rockstar Energy Russ Savage has built a stake of more than 12 million CELH shares. Savage now controls roughly 4.7% of the company’s stock, worth about $300 million.

In an August 7 CNBC appearance, Savage called for the ouster of the Celsius “CEO, the COO, the brand manager, and the marketing manager,” while publicly volunteering to take the CEO role himself. His core complaint is that Celsius has too many management layers and insufficient accountability.

With the potential for an activist turnaround providing a near-term boost in the share price, we believe this provides an opportune time to exit Celsius. The decline in sales of two of the core brands is a thesis-killer in our view.

We believe there are better places to put capital than waiting on a turnaround to take hold.

Action to Take: Sell Celsius Holdings (Nasdaq: CELH)

Porter & Co.
Stevenson, Maryland 

The post Sell Alerts: Coupang (CPNG) And Celsius Holdings (CELH) appeared first on Porter & Co..

Issue#142, Volume#3

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Why There’s No More Cheap Capital For AI

Today is Porter’s fifth essay in a multi-part series about the enormous financial risks of the ongoing artificial intelligence (“AI”) bubble. Please see the first essay here, the second essay here, the third essay here, and the fourth essay here.

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Hyperscaler free cash flow is on track to fall roughly 50% from its late-2024 peak through early 2026, and to turn negative for the first time in 2027.

That means the entire bubble will depend on credit by the end of this year.

Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Meta (META), and Oracle (ORCL) have added roughly $350 billion of on-balance-sheet debt in five years, plus $1.1 trillion of off-balance-sheet data-center lease commitments and GPU supply deals – $1.65 trillion of hidden obligations across five names.

Morgan Stanley estimates the sector faces a $1.5 trillion external financing gap against $2.9 trillion of capex through 2028.

Where will the money come from…? Some of it will come from Nvidia’s (NVDA) new $500 billion credit fund. And even more will come from the public.

Pay attention: This is where the artificial intelligence (“AI”) buildout goes from something that will threaten tech companies to something that will threaten our entire banking system and our entire economy.

Banks, ever ready to package dodgy debt for other people to hold, have begun operation “AI bag holder.”

Outstanding data-center debt securitization issuance grew from $4 billion in 2020 to $61 billion year-to-date 2026. Barclays projects $180 billion in securitizations by year-end 2028 (!).

How will so much AI data-center debt possibly be sold to investors? By regulatory arbitrage of course! How do you make dodgy debt attractive to the financial system? By “proving” to the regulators that it’s risk-free.

On February 11, 2026, $500 million of Compass Datacenters’ $830 million asset-backed security (“ABS”) became the first data-center securitization rated AAA by Moody’s. Pricing: +120 basis points over Treasuries.

Keep in mind, Moody’s only began rating the sector in September 2025.

Thus, on a credit channel that’s scaled 15x in six years, using a rating methodology that’s about a year old, Moody’s delivered its first AAA rating just as the bubble reaches its zenith.

Where have we seen this before? The AAA-rated collateralized debt obligation (“CDO”) of the AI era is here!

And regulators just gave the AI credit machine the same free pass that created the entire mortgage fraud bubble. On July 29, 2026 – the same day CoreWeave (see Friday’s Journal) paid an extra 125 basis points to force through its loans backed by fast-processing GPU chips – the Securities And Exchange Commission’s (“SEC”) Office of Structured Finance sent a letter to Latham & Watkins – the law firm representing the case – that will move a trillion dollars of debt.

The staff wrote:

Based on the representations in your letter, we agree that the fixed-income or other securities issued in data center securitizations of the type described in your letter are not asset-backed securities as defined in section 3(a)(79) of the Securities Exchange Act of 1934.

Translation: AI debt isn’t an ABS. So the rules Congress and the SEC wrote after 2008 specifically to prevent another AAA-rated credit blowup do not apply.

Regulation RR’s 5% risk retention – the Dodd-Frank rule (a federal law passed in 2010 to prevent another Global Financial Crisis) that was supposed to force the sponsor of a securitization to keep skin in the game – gone. Regulation AB’s loan-level disclosures – gone. Rule 192’s prohibition on conflicts of interest, the one written to stop the Abacus-style short-your-own-deal trades – gone. Rule 15Ga-2’s pre-sale disclosure of third-party due diligence findings – gone.

The $200 billion of data-center debt Barclays expects to be sold by 2028 will move without any of these investor protections. Put that together with the Moody’s AAA rating and you’ve got the makings of an epic financial bubble – and collapse.

The rating agency that stamped AAA on subprime CDOs is back with a rating methodology less than a year old, on a market that grew 15-fold in six years, issuing AAA on paper the SEC has just exempted from the risk-retention, disclosure, and conflict-of-interest rules that were written to prevent exactly this. This is not a bug in the system. This is the system moving $1 trillion of AI credit onto insurance-company, pension-fund, and bank balance sheets by pretending the risk isn’t there.

History rhymes because leverage rhymes.

Jay Cooke & Company financed the Northern Pacific Railway on the theory it could always sell more bonds to European investors. A Vienna real-estate bust froze European demand in mid-1873. Cooke was left holding 75% of the bonds himself. He declared bankruptcy on September 18, 1873. The New York Stock Exchange closed for 10 days. Eighty-nine of the country’s 364 railroads failed. Eighteen thousand businesses went under. Unemployment reached 14% nationally and 25% in New York City. Rail construction fell from 7,500 miles laid in 1872 to 1,600 miles in 1875.

The AI collapse will be similar. What’s the first domino? Oracle.

Its credit spreads will blow out when its $300 billion of committed revenue disappears and its equity will collapse.

Data-center ABS spreads will widen from 400 to 800 basis points within six months of the first hyperscaler cancellation.

Digital Realty Trust (DLR) and Equinix (EQIX) marks drop 50%.

Regional banks with data-center and office exposure will fail: Zions Bancorporation (ZION), Regions Financial (RF), KeyCorp (KEY), Truist Financial (TFC), and Fifth Third Bancorp (FITB).

Index fund concentration is worse today than it was in March 2000. The top seven S&P 500 stocks are 35% of the index today, versus 18% for Cisco Systems (CSCO), Microsoft, Intel (INTC), and General Electric (GE) at the 2000 top. A 50% to 60% Magnificent 7 drawdown takes the S&P 500 down 35% to 45%.

Treasuries rally… at first. Flight to quality will push the 10-year yield down 75 to 100 basis points. But then the fiscal deficit will soar as capital-gains tax receipts collapse, and unprecedented government borrowing demand will push yields to levels we haven’t seen in decades. Over 10% on the 10-year U.S. Treasury bond.

Unemployment will soar. Direct tech and hyperscaler layoffs of 300,000 to 500,000. Data-center construction workers, utility contractors, and second-order services take another million-plus. Prime-age labor-force participation will fall another 100 basis points.

Then the 2028 election will become a critical referendum on how we’re going to run our country. The Democrats will win. And they will choose socialism.

The CHIPS Act passed in 2022 shelled out $50 billion in federal money to support the semiconductor industry. Expect CHIPS Act 2.0, with federal grants converted to equity. Expect direct Fed liquidity facilities to backstop the data-center ABS and GPU-collateralized-loan markets, resembling the 2008 federal emergency lending programs. Total emergency fiscal envelope, 2026 through 2028: $500 billion to $800 billion, on top of existing deficits.

How to protect yourself?

• Gold, in the long run
• Cash, in the short run
• Regulated utilities that captured the AI power-purchase agreements before the mania
• Tobacco and energy majors with capital discipline
• Biotechnology, because compute cannot destroy a 20-year patent

What to short: Oracle. CoreWeave. Nebius Group N.V. (NBIS). IREN (IREN). Vertiv Holdings (VRT). Digital Realty. Equinix.

Tell me what you think of today’s Daily Journal: porterstansberrydirect@gmail.com

Good investing,

F. Porter Stansberry
Stevenson, Maryland

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Presented By: Paradigm Press

Oil Prices Could Send These Three Stocks Soaring

If the turmoil in the Middle East has you rushing to buy oil stocks right now – STOP and read this.

The biggest gains from the last oil crisis didn’t come from oil companies.

The top-performing energy stocks were tiny. Practically unknown. And every major oil company in America was completely dependent on them.

Today, it’s the exact scenario— except the scale is roughly 13,000 times larger.

That’s why I just vetted three of these companies in this exact same position.

But this time it’s not just oil that’s driving them higher…

Trump’s latest initiative could lead this sector to a major surge.

Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. Paradigm Press is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.

3 Things To Know Before We Go…

1. The global bond market is repricing the cost of government debt. Britain’s 30-year gilt yields 5.85% – the highest since 1998. The U.S. 30-year Treasury hit 5.33%, a level last seen in 2007. France’s is near 4.9%, an 18-year high. Germany’s reached 3.78%, the highest in 15 years. Japan’s is near a record just above 4%. This is not an inflation scare. All of it came from the real yield – reckless fiscal policy is driving investors to demand higher yields to lend to governments worldwide.

2. Traders are betting against tech while tech execs are buying. Hedge funds and asset managers have built their largest-net short position on record in Nasdaq 100 futures – contracts that pay off when the index falls – at nearly $20 billion. At the same time, corporate insiders at technology companies, the executives and directors with the clearest view of their own businesses, are buying their own shares at close to a 15-year high.

3. Home Depot (HD) shrugs off the frozen housing market. Home Depot reported fiscal Q2 2026 results (quarter ending August 2) that exceeded analyst estimates across the board this morning. Revenue grew 5.7% year-on-year (“YOY”) to $47.86 billion, while net income increased 4.7% YOY to $4.8 billion. Comparable sales rose 1.7% YOY, notching the strongest growth since Q3 2022, fueled by 11% growth in online sales. CFO Richard McPhail described the macro environment as challenging due to “frozen housing market conditions,” but noted that the company is taking market share and reaffirmed full-year fiscal 2026 guidance.

Chart Of The Day… Axon Enterprise (AXON)

Shares of law-enforcement hardware and software supplier Axon Enterprise (Axon) have gained 20% since our July 18 Complete Investor recommendation. The gains have been fueled by Axon’s stellar Q2 earnings on August 5, which included a 35% YOY increase in revenue that marked Axon’s 10th consecutive quarter of 30% or better revenue growth.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post No More Repo Facility = No More Free Money appeared first on Porter & Co..

Issue#141, Volume#3

Why Nvidia’s Neoclouds Will Collapse

Presented By: Brownstone Research

How to Profit From”The SpaceX Supercycle”

Act Before August 26

According to legendary tech investor Jeff Brown…

Three words on page 37 of the SpaceX IPO filing…

Signal Musk is about to trigger a rare wealth supercycle…

And send billions into a sector nobody associates with tech.

Click Here Now To Watch His Urgent Strategy Session

Editor’s Note: Keep in mind, we only accept advertising from publishers we know to offer well-researched ideas vetted by a legal team, excellent customer service, and reasonable refund policies. Brownstone is one such partner. We do not, however, under any circumstances make any representations about their investment ideas or strategies, nor will we warrant them as equal to our own. We do recognize that the markets are tempestuous and, at times, ideas that we may not endorse prove valuable.

3 Things To Know Before We Go…

1. Money managers trade big on Treasuries. Hedge funds currently own $2.4 trillion in U.S. Treasury bonds, up from $600 million a decade ago. Part of that growth comes from the increasingly popular “basis trade” – buying Treasuries and simultaneously shorting Treasury futures, pocketing the small spread between the two. To make this worthwhile, funds can borrow money to use 15x leverage from the “repurchase” (repo) market, which now supplies over $3 trillion in overnight funding. It’s all good until the market goes against you.

2. Big tech’s AI bill is 4x bigger than it looks. Alphabet (GOOG), Amazon (AMZN), Meta (META), and Microsoft (MSFT) now carry $2.4 trillion in off-balance-sheet commitments – versus just $604 billion on the balance sheet, reports the Wall Street Journal. This is locked-in future spending on purchase commitments for chips, cloud capacity, energy, and leases. The inertia is bullish near term for the entire AI value chain – Nvidia, Broadcom, memory, power – but hinges on AI revenue actually materializing.

3. The AI build-out is now raising everyone’s borrowing costs. The highest-rated corporate borrowers have issued nearly $1.5 trillion of investment-grade bonds this year, up 36% from a year ago – and $200 billion of that came from the biggest tech companies. Treasury Secretary Scott Bessent has leaned on short-term bills to fund the deficit, which Barclays estimates will cut the supply of new Treasury notes and bonds by about $440 billion this year. Corporate supply is more than filling the gap – growing by $474 billion. Now, bond funds are selling Treasuries to buy the higher-yielding corporate debt. The AI trade was built on cheap capital. It is now making capital more expensive.

Chart Of The Day… LandBridge (LB)

Shares of the West Texas land-leasing company (and Complete Investor recommendation) LandBridge (LB) are up 60% this year – with revenue up 41% year-on-year (“YOY”) and net income up 68% YOY. And it’s now further positioned to capitalize on the data center boom, with the company reporting advanced discussions with seven counterparties representing over 10 gigawatts of power and data center capacity in its latest quarterly.

Please note: The investments in our “Porter & Co. Top Positions” should not be considered current recommendations. These positions are the best performers across our publications – and the securities listed may (or may not) be above the current buy-up-to price. To learn more, visit the current recommendations page of the relevant service, here| New Window. To gain access or to learn more about our current recommendations, call our Customer Care team at 888-610-8895 or internationally at +1 443-815-4447.

The post From Him Who Hath Not, Much Will Be Taken appeared first on Porter & Co..