Author Archives: Scalper1

United Therapeutics Down As FDA Rejects Medtronic’s Remodulin Pump

Biotech United Therapeutics ( UTHR ) said Thursday that the Food and Drug Administration had rejected its partner Medtronic ‘s ( MDT ) application for approval of a device to deliver the former’s lung-disease drug Remodulin, sending United Therapeutics’ stock down sharply. Remodulin, a treatment for pulmonary arterial hypertension, became a top seller for United Therapeutics in injectable form, but the company has been developing different delivery methods that broaden the patient base and also help extend the drug’s patent life. United Therapeutics had hoped that Medtronic’s implantable device could treat patients with the most severe forms of the disease, who can currently only use the intravenous form. United Therapeutics’ brief SEC filing didn’t say why the FDA had rejected the device, and Medtronic has said nothing about it, although the FDA’s response letter arrived over a week earlier. The filing did say that the letter had “noted various measures that Medtronic should take” to make the filing approvable, which the two companies were currently discussing. United Therapeutics also noted that it’s filed for a label extension on Remodulin to approve it for use through the device, which is due for a decision by October. United Therapeutics’ stock hit a 17-month low of 109.44 in early trading on the stock market today . By mid-morning it was down 8.5% near 111, while Medtronic stock was down more than 1%, near 73.50. A top-rated stock a year ago, United Therapeutics retains a stellar IBD EPS Rank of 98, but quarterly results that missed analyst estimates and increasing competition started pressuring the stock, even before the biotech sell-off started in August. This made the pump financially important, according to RBC Capital Markets analyst Michael Yee. “Investors view the ‘implantable pump’ as an important near-term program that could stop or slow erosion of Remodulin generic with a settlement with ( Novartis ( NVS ) unit) Sandoz set to allow a version starting June 2018,” Yee wrote in a research note. “If this pump is continuously delayed, then there’s less time to convert patients over to it and bring the approvability into question, and (it) increases risk of generic erosion of the core franchise.”

PayPal: Solo Payments Vendor Going Back To The Future

New money never sleeps — or so February’s first-ever PayPal ( PYPL ) Super Bowl ad asked viewers to believe. The aggressive spot  was an attempt to tell the public that PayPal is the future of money. It was also meant to suggest to investors that good things lie ahead now that the company is once again on its own after being spun off from 13-year parent  eBay ( EBAY ). PayPal, however, finds itself surrounded by some big companies with payments technologies that could disrupt its lead. Apple ( AAPL ), Square ( SQ ) and Alphabet ’s ( GOOGL ) Google are among the companies building digital wallet technologies that compete in one way or another with PayPal. “The new campaign is the very positioning we did pre- IPO (in 2002),” Eric Jackson, CEO of business technology company CapLinked, told IBD. Jackson was PayPal’s first director of marketing and wrote a memoir about his time at the company. Companies in the payments sector often do business with one another. Many of the merchants signed up with Apple Pay have their payments processed by PayPal subsidiary Braintree, for example. “As the kids say, there are ‘frenemies’ in payments,” Wedbush analyst Gil Luria told IBD. Still, PayPal stock was down 4.5% in morning trading Friday on news that both Apple and  Starbucks ( SBUX ) are expanding the reach of their mobile payment systems, aiming to get a bigger edge on rivals such as PayPal and Google. Apple Pay will be included in Apple’s Safari browser in time for Q4 holiday shopping, reported  Re/code . The payment system will continue to work with Apple’s fingerprint ID technology. At least one analyst didn’t see a big impact on PayPal, however. “While this (Apple Pay-Safari) could represent some near-term headline risk for PayPal, we believe the competitive impact introduced by Apple Pay in-browser will be limited due to potential consumer and merchant adoption hurdles,” Jefferies analyst Jason Kupferberg said in a research report. “PayPal’s own expedited checkout process, One Touch, is already in use by more than 250 of the top 500 internet retailers” Meanwhile, in many ways, Braintree’s peer-to-peer payments app Venmo is in a position similar to PayPal in its own very early days. Instead of focusing only on its first market, person-to-person payments, Venmo — like PayPal, which started out as a free service before it built enough heft to charge merchants — is turning to merchant transactions to turn a profit. Targeting merchant transaction fees “is not that much of a leap,” Luria said. “That’s what Elon Musk and Peter Thiel (PayPal co-founders along with Max Levchin) did 15 years ago. It’s not unprecedented to take the Venmo users and turn them into paying customers.” EBay Spinoff Leading To Greater Success? That PayPal would be able to unlock business opportunities previously inaccessible to it with eBay as its owner — other e-commerce rivals didn’t particularly care to give business to a competitor such as eBay — was a notable selling point when the split-up was  announced in 2015 . PayPal executives say that the company has advanced in several ways that it couldn’t while it was a part of eBay. The marketing campaign that the Super Bowl ad was designed to support might not have been a priority under eBay, says Juan Benitez, general manager and CTO at Braintree. Braintree powers payments behind fast-growing private companies such as ride hailing app Uber and alternative accommodations provider Airbnb. Analyst Luria says that most of Braintree’s profit comes from those two firms. Uber and Airbnb were Braintree’s top clients when it was part of eBay as well, but the separation has led to at least one marquee client: the fast-growing e-tail startup Jet.com. Its CEO, Marc Lore, aims to compete with Amazon.com by, like Amazon, offering free two-day shipping. EBay is another rival.  “Jet is   something that  maybe  would have had a question or two asked   before before the split,” Benitez told IBD.  In addition, he says that Braintree is expanding its pilot merchant program with China e-commerce leader  Alibaba ( BABA ). ITG Investment Research analyst Steve Weinstein told IBD that PayPal’s post-eBay success has much to do with the company bringing on new merchants while part of eBay, “and that moment has continued.” He says that it’s “hard to tell” whether things have changed since the split, since it’s so recent. But according to Wedbush’s Luria, the truth about PayPal’s real post-eBay value is related to the spinoff’s financials. “When the carving out was happening, when the separation was negotiated, the eBay board allocated a lot of the revenue to PayPal and expenses to eBay,” he said. The reasoning, he says, is that PayPal was getting twice the multiple (price-to-earnings ratio), so every dollar of profit they put into PayPal was going to get twice as much market value. Luria said that beyond the financials, the split produced a “freeing effect” that has allowed the deals with Alibaba and Jet.com. “It’s now an easier decision to incorporate PayPal into merchant acceptance,” he said. The split, says Luria, gave PayPal the “power of focus.” PayPal no longer needs approval from eBay executives on important decisions. The Future Vs. Apple Pay, Android Pay No doubt competition with tech titans in payments will remain fierce, but PayPal is in a strong position. With its base of 13 million active merchants, the company can achieve powerful network effects from that critical mass, which makes it a considerable challenge to unseat PayPal as payments king. CEO Jeff Bezos’ mighty e-commerce firm Amazon.com has been competing with PayPal for 10 years via its own payments platform, with negligible results. “Now the subtlety is that Apple Pay and Android Pay have an advantage,” Luria said. Because the companies integrate their payments into iOS and Android, respectively, the payment experience is seamless — which is critical for digital wallets. PayPal executives say that Apple Pay and Android Pay are actually good for their company, since those services often use PayPal’s Braintree to process transactions. Others, however, don’t see PayPal walking arm in arm with Apple or Google. “Embracing the advent of Android Pay and Apple Pay sounds a little hollow,” former PayPal exec Jackson said. “It sounds more like corporate spin than reality.” Both Apple and Google are able to position their payments systems as the default option on their own mobile devices and services, which could make things rougher for PayPal. But even if Apple and Google do it, Weinstein says, that move by itself would not be enough to unseat San Jose, Calif.-based PayPal from the payments lead. “PayPal has a lot of other products,” he said. Analysts and industry watchers aren’t sure how PayPal plans to tackle its challenges. Innovation is one strategy that’s worked well in the past, such as with One Touch , the company’s tech tool to reduce checkout time. Acquisitions have been helpful, too — for example, the $800 million Braintree purchase, which included Venmo. Regardless of how PayPal proceeds, how it separates itself from its competition will be key, says Jackson. As the Super Bowl ad shows, PayPal has its game face on.

How To Avoid The Worst Sector ETFs: Q1’16

Question: Why are there so many ETFs? Answer: ETF providers tend to make lots of money on each ETF so they create more products to sell. The large number of ETFs has little to do with serving your best interests. Below are three red flags you can use to avoid the worst ETFs: Inadequate Liquidity This issue is the easiest to avoid, and our advice is simple. Avoid all ETFs with less than $100 million in assets. Low levels of liquidity can lead to a discrepancy between the price of the ETF and the underlying value of the securities it holds. Plus, low asset levels tend to mean lower volume in the ETF and larger bid-ask spreads. High Fees ETFs should be cheap, but not all of them are. The first step here is to know what is cheap and expensive. To ensure you are paying at or below average fees, invest only in ETFs with total annual costs below 0.49%, which is the average total annual costs of the 182 U.S. equity Sector ETFs we cover. The weighted average is slightly lower at 0.28%, which highlights how investors tend to put their money in ETFs with low fees . Figure 1 shows that the PowerShares KBW High Dividend Yield (NYSEARCA: KBWD ) is the most expensive sector ETF and the Schwab U.S. REIT ETF (NYSEARCA: SCHH ) is the least expensive. The ARK ETF Trust ((NYSEARCA: ARKQ ) and (NYSEARCA: ARKW )) provides two of the most expensive ETFs while Vanguard ETFs ( VIS , VDC , VGT , and VHT ) are among the cheapest. Figure 1: 5 Least and Most Expensive Sector ETFs Click to enlarge Sources: New Constructs, LLC and company filings Investors need not pay high fees for quality holdings. The Market Vectors Semiconductor ETF (NYSEARCA: SMH ) earns our Very Attractive rating and has low total annual costs of only 0.39%. On the other hand, Schwab U.S. REIT ETF holds poor stocks. No matter how cheap an ETF, if it holds bad stocks, its performance will be bad. The quality of an ETFs holdings matters more than its price. Poor Holdings Avoiding poor holdings is by far the hardest part of avoiding bad ETFs, but it is also the most important because an ETF’s performance is determined more by its holdings than its costs. Figure 2 shows the ETFs within each sector with the worst holdings or portfolio management ratings . Figure 2: Sector ETFs with the Worst Holdings Click to enlarge Sources: New Constructs, LLC and company filings PowerShares ( PSCC , PTH , and PSCU ) appear more often than any other providers in Figure 2, which means that they offer the most ETFs with the worst holdings. The U.S. Telecommunications ETF (NYSEARCA: IYZ ) is the worst rated ETF in Figure 2. The PowerShares DWA Healthcare Momentum Portfolio (NYSEARCA: PTH ), the PowerShares S&P Small Cap Consumer Staples ((NASDAQ: PSCC )), the ARK Innovation ETF (NYSEARCA: ARKK ), and the Fidelity MSCI Real Estate Index Fund (NYSEARCA: FREL ) also earn a Very Dangerous predictive overall rating, which means not only do they hold poor stocks, they charge high total annual costs. Our overall ratings on ETFs are based primarily on our stock ratings of their holdings. The Danger Within Buying an ETF without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on ETF holdings is necessary due diligence because an ETF’s performance is only as good as its holdings’ performance. PERFORMANCE OF ETFs HOLDINGs = PERFORMANCE OF ETF Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.