The consensus has called for an economic recovery by the second half of the year. But the chances of that happening are…
Remember: There’s a big difference between the stock market and the economy. [0:30]
Then Scot Cohen, executive chairman of Wrap Technologies and a money manager for over 20 years, returns to the podcast. If you’re a new listener, this is one of the most incredible small-cap companies I’ve ever covered. [22:47]
Anyone who invested in COVID-19 biotech stocks has a reason to be worried… Here’s why you should be looking to take profits following massive moves higher in the biotech space right now. [54:47]
- Rant: Chances of a second-half recovery [0:30]
- Guest: Scot Cohen, executive chairman of Wrap Technologies [22:47]
- Education: Take profits in biotech [54:47]
Wall Street Unplugged | 722
The chances of a second-half recovery are now zero
Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.
Frank Curzio: What going on out there? It’s May 20th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets.
Frank Curzio: I wanna discuss something that’s pretty amazing to me. People love stories, love entertainment. Maybe you’ll love this one. I’m gonna try and make it as entertaining as possible. This goes out to everyone who is super bullish right now, which is basically every one I saw on financial television on Monday, the market surged over 900 points.
Frank Curzio: On closing in on the 200 day moving average, the S&P 500, where every technical analyst will tell you buy the index aggressively. I wanna talk about GDP. Yes, I said GDP. Please stay with me. I’m gonna make this interesting. Because on April 29th, we released Q1 GDP. And U.S. economy saw a decline of 4.8%. That was the largest in 12 years, since the credit crisis, Q4 2008, where GDP declined 8.4%. Huge number, 4.8.
Frank Curzio: But it seems to revise two more times, just to let you guys know how economics in this data works. So, this is considered a lagging indicator. Tell us what happened in the past from January through March, right? So, this happened already, don’t worry about it, fine. The final revision for Q1 is gonna be reported on June 25th. And this year, it gets revised a little bit, not too crazy. Maybe it goes to 4.5 or 5.2% around there. Either way, the 4.8 decline is a monster number, right?
Frank Curzio: Remember this from January through March, where our lockdown didn’t start, at least for most states until mid-March. That’s when New York announced that they were going on lockdown. For sure California was after that, but it was mid-March. So, you still had two pretty good months, and we declined 4.8%.
Frank Curzio: Now let’s go to Q2, which is measuring the economic activity right now, right, from April to June. And as of today, which is Wednesday, Analysts are forecasting a near 40% decline in GDP, eight times the rate of decline from Q1.
Frank Curzio: Let’s put this in perspective. The largest quarterly decline on record, dating back to the ’30s, that’s when we started keeping track of all this, the biggest was 10%. It was Q1 1958. Yes, I looked it up. You had two million people file for unemployment, to put that in perspective, that’s about 6.2%. That was unemployment rate that was in 1958.
Frank Curzio: So, at 40%, four times larger than the biggest decline in GDP in the history of America. And we have 30 million people that filed for unemployment thus far, which amounts to around 15% unemployment rate, which is expected to climb anywhere between 20 and 25% by the end of this month.
Frank Curzio: Now, over the course of history, when we see large contractions in GDP, stay with me, trust me I’ll make it worth it, they’re usually followed by a huge bounce. And think about that, right? Because when we look at sell side analysts, which is the consensus, which everything’s out there, right, you need to know what the consensus is. If you think it’s gonna fall below those numbers, then you would use shortstops. If you think the consensus is not aggressive enough, or those numbers are not optimistic enough, you would buy stocks, right?
Frank Curzio: So, your goal as an analyst is to look at the consensus and see if you agree with it or not. And if you don’t, that’s how you base your trade on. And sell side analysts do one thing, they look at historical analysis and they compare everything. That’s what they do.
Frank Curzio: Okay, so over the course of history when we see large contractions in GDP, especially when it comes to these black swan events, they’re usually followed by a huge bounce. When you go back to the ’70s GDP, where we saw a decline, and ’70 to ’73 GDP grew an average of 5% annually, in ’91 same thing. 2000, 2001 recession, GDP grew around 2% annually for several years. And then we all know about 2008-2009 crisis. The GDP started growing around 2% annually through 2012 was a major bump up, but steadily into the longest bull market in history.
Frank Curzio: So, lots of numbers here. What you need to understand is we usually see a nice bounce in GDP after a recession, it’s all you need to know. Here’s where things get interesting. Goldman Sachs publishes GDP forecasts, that’s on February. So, the firm predicted we’ll see a steep decline in Q1 from the coronavirus. But it’s gonna be followed by an immediate V-shaped recovery, okay? I’m not picking on Goldman, a lot of analysts had this same call. So, a quick rebound in Q2, remember that, in Q2.
Frank Curzio: So, why were they predicting a quick rebound? ‘Cause this is what happened in past pandemics, where we saw SARS and swine flu I guess over the past 15 years. They said, okay, this is the model, this always happens. GDP fall sharply one quarter then comes right back. Then Goldman Sachs said, oh, shit, wait a minute. It’s still gonna be a V-shaped recovery.
Frank Curzio: But Q2 GDP, which we thought was gonna be a quick rebound, it’s only gonna be down about 5%. That was their forecast on March 15th. And then it’s gonna be followed by a 3% increase in Q3 and a 4% increase in GDP in Q4.
Frank Curzio: Now, Goldman’s forecasting for 39% decline in GDP in Q2, along with unemployment surging to 25%. Again, I’m not picking on Goldman here ’cause most analysts had similar forecasts and they changed them, which is why I thought stocks are gonna fall sharply, given the coronavirus was not SARS, and everybody was comparing it to SARS. And China was much different in 2003 during SARS compared to today, where it accounts for 40% of the world’s growth in 2019, and you shut it down for months. So, it’s just a matter of time before stocks fell.
Frank Curzio: Again, they were basing their models on what happens historically. And people say well, everything history repeats. Not all the time.
Frank Curzio: Now, when’s the last time you saw the U.S., every state, or almost every state, on lockdown. I’ve never seen it. Nobody has seen it, right? Doesn’t always follow, or maybe not follow, but it runs. Whatever you wanna say. Not always the case, guys. So, now we’re seeing a huge rise in stocks, and I get it. And the Fed printed three trillion already, with another three trillion in the queue. But the move hiring stocks was based on what?
Frank Curzio: That, hey, this is gonna be short-term. We’re gonna have a quick recovery. And also, we might have a vaccine, which I’m gonna break down but during the educational segment, since this is one of the shadiest companies you’ll find in biotech, ’cause market surged on that news on Monday. And now, some of the infectious doctors are saying, wait a minute, all right, this data isn’t as great as you think. And it’s only phase one and phase two, phase three is not gonna come in. So, a very promotional company, the CEO, they have a checkered past. But the recovery was supposed to happen in the second half of this year.
Frank Curzio: So, now Goldman just updated its forecasts for GDP, and that’s for Q3 and Q4. Again, both supposed to be positive. But now Goldman’s predicting GDP for Q3 will decline by 7% and Q4, which GDP was expected to surge 20%.
Frank Curzio: Now, Goldman’s predicting Q4 will decline by 5.4%. So, think about that for a minute because you’re looking at stocks with all the optimism, everything is opening up, that everything was gonna return to normal in the second half of this year. We’re only supposed to see two quarters of GDP declines, which is definition of a recession in 2020. Now it’s turning to four quarters.
Frank Curzio: So, every single quarter in 2020 is gonna be negative, with Q2 leading the way at 39-40%. Now, why am I bringing all this up? Because it matters to your portfolios. We’re in unprecedented times. I mean, shit that’s never happened before in the history of America, it’s happening right now.
Frank Curzio: And while these analysts, so-called experts told us, we’re gonna see a rebound in Q2, then it got pushed out to Q3 then Q4. Now, it’s being pushed out to 2021. And who knows if Q1 or Q2 are going to be positive. We’re hoping but can we see six straight quarters? And that’ll be insane, that’s not pricing. I don’t think four quarters of negative GDP is pricing.
Frank Curzio: I mean we have Fed governors one saying, hey, we have to open up the economy, everything’s gonna return back to normal. Another one is saying we need to launch stimulus plan immediately and release that three trillion. Small business are getting, I mean, the opinions that you’re getting. I mean, these are people that are supposed to work together. I mean, what a difference of opinion.
Frank Curzio: Yes, release $3 trillion. No, we don’t need it yet. That’s a pretty big decision. So, those predicting, which are a ton of people out there, that unemployment’s gonna get back to normal this year, or fall from over 20% to 3.8% again, pre-coronavirus levels, that’s definitely, it’s a zero chance. It’s definitely not gonna happen. Definitely not gonna happen. We’re seeing negative GDP for Q3, Q4. A lot of these jobs aren’t gonna come back online. We’re gonna still see a 12-15% unemployment rate at the end of this year. We’re supposed to be at seven, six, at four.
Frank Curzio: Remember, we’re supposed to go back to pre-coronavirus levels, even though the market is trading as not if we’re gonna go back, but we’re gonna have the best conditions in the history of America right now. We have stocks that are ramping higher, where the S&P 500 is trading higher than where it was in March, on March 1st. When we really saw the market start to decline, as if we discovered a vaccine already for the coronavirus, as if the coronavirus is not gonna spread again, with states opening back up, even though we’re seeing a province in China just went back on lockdown.
Frank Curzio: So did Singapore. Look at Germany. This is the process. If everybody’s home, obviously it’s not gonna spread. If you let everybody out, you’re probably gonna see it spread again. Very, very, very less than 1% of the population have the coronavirus, less than 1%. You’re gonna let everybody out, of course it’s going to spread. That’s why we’re hoping for a vaccine or herd immunity.
Frank Curzio: The stocks going high is if our relationship with China, who’s by far America’s biggest growth engine, is perfectly fine as if Europe and Asia, where 25% of S&P profits come from, are not gonna see a steep recession for 2021. I mean, Europe was in a recession before this happened. China has seen a slowdown in growth before this happened.
Frank Curzio: Stock trading highs of CapEx was not up by 25% across the board for American companies, which leads directly to growth, along with marketing budgets being cut by 20, 25%. So, CapEx is used for M&A, mergers and acquisitions, upgrade equipment through productivity. How do you cut that and cut marketing and expect to grow the following year? It’s almost impossible. Stocks going high with GDP expected now declined every quarter in 2020. And that wasn’t on the table. That was just on the table this week. And unemployment GDP retail sales at levels we haven’t seen since the Great Depression, 1930s.
Frank Curzio: So, guys, this is a very dangerous market where earnings, GDP, retail sales, unemployment, all that stuff was expected to go back to normal or pre-coronavirus levels, which is February 2020. But not only they’re not gonna get back to these levels in 2020, who knows if we’ll get to them in 2021? I doubt it. And maybe 2022 now? Is that how forward-looking the market is? ‘Cause 2020 is a throw away. 2020 was a throw away, that’s what’s alright. Q3 was gonna be great second, and then Q4. Now, you’re talking about negative GDP for Q3 and Q4. It’s important for you to understand that because why are stocks trading higher?
Frank Curzio: Okay, government stimulus, you got it, but it’s factored in, six trillion is factored in, we’re talking about the other three trillion, it’s factored in, I get it. If you’ll say, well follow the Fed, never disagree with the Fed and just… That makes sense in 2010, 2011, when stocks were trading at 11 times forward earnings. They’re trading at 24 times forwards earnings, their most expensive valuation 18 years.
Frank Curzio: So, the Fed putting all this money into the market is priced in. The vaccine is going to take a while. The quickest we’ve ever brought a vaccine in the market is four years. And yes, we have 30 major companies working with smaller companies as well, collaborating together, and maybe it comes out in a year and a half, two years. It’s not coming out nine months. They just started working on this a few months ago. Not coming out probably for a year and a half, before we distribute it. Is it gonna be more like mumps, rubella, which is two shots only, and then you’re good, or one shot? Or is it more like the flu, where the strain keeps changing, and a lot of times it doesn’t work? 35 million people got the flu last year, in the last flu season. A lot of hope in this market.
Frank Curzio: Now why am I bringing all this up? Okay, ’cause I try to make economics of the economy interesting, right? ‘Cause it’s about you, it’s about what you buy, what your neighbors are buying, what you see out there. And people just make economics so difficult, bell curves and all this crazy stuff. But it’s important because this relates to your portfolio.
Frank Curzio: And I’m bringing this up because when I see guys like Mr. Wonderful, Kevin O’Leary, going on CNBC on Monday, when the market is up 3% plus after Moderna announced positive phase one results, the COVID-19 vaccine. Which again, leading infection doctors tore it apart, to be a great educational segment guys listen to after this. It’s my interview today.
Frank Curzio: But when Mr. Wonderful, Kevin O’Leary, is going on, say you need to be invested in this market. And if you’re an investor, you’re missing days like this, you’re missing 30, 40% of the returns because the Fed is going to overcompensate. That’s what he’s saying on TV. He’s telling everybody get into the market right now at these levels.
Frank Curzio: And look, I like O’Leary, I love “Shark Tank.” If I was sitting in his seat on “Shark Tank,” and he made that pitch to me to buy the market here, and you’re missing it, with stocks up 35% from lows, what, six weeks ago. Valuations through the stratosphere, where it’s the most expensive market in close to 20 years. Where we already saw three trillion stimulus, talk of another three trillion on the way, which means it’s pretty much factored in. I would have kicked him right out of the fucking room, goodbye. Double doors, get out, if I was on “Shark Tank.”
Frank Curzio: Again, I like Kevin. He’s got to criticize everybody. So, I’m sure he could take it. I’m more than happy to debate him on this podcast. But I would’ve thrown him right out of the room and telling everyone. Again, that responsibility of you going on TV and people listen to you.
Frank Curzio: So, everyone who’s on Fast Money on CNBC, retired people that are on the sidelines because they have little working power, telling them that they’re missing it and you need to get in, that pisses me off. I understand the entertainment factor. I understand you wanna be edgy. I understand you wanna say things that are opposite, contrarian, in these big bold calls. And that’s how it goes. I get it.
Frank Curzio: I’m going through the rounds now. Different TV appearances, just had one yesterday at Cheddar. Which you could watch on Curzio Research YouTube page. But guys, it’s a dangerous market out there. Yes, we got out early. Yes, we got back in on the downturn recommending themes that are doing great in the portfolios.
Frank Curzio: But if you look at the overall market, it’s being driven by three sectors. It’s technology, it’s biotech, and it’s healthcare. ‘Cause healthcare, you’re paying those huge premiums and the hospitals are empty ’cause they don’t have to do surgeries for anything else right now. It’s great, great business to be in. Pay premiums in full, but you’re not allowed to go to the doctor. But outside of those sectors, if you look at the S&P 500 on an equal weight basis, what does that mean? It means that obviously, which stocks carry the biggest weight in the S&P 500, would be Microsoft, Amazon, and Apple, right? Pretty sure all three of those have over trillion dollar valuations. So, they account for… the technology accounts for with Amazon and Google in there, account for 30% of the index.
Frank Curzio: And a lot of those stocks are rising ’cause they didn’t get hurt as much from the coronavirus. But when you take an equal weight and place an equal weight for every one of those stocks, the S&P 500 is down 20% this year. So, when you look under the hood, it’s not as good as it seems. And while the market is dangerous, there’s lots of industries that are gonna play catch up.
Frank Curzio: Industrials, which throw Pro Home Builders into that. Energy as a longer term play. You need 45,000 a barrel, you’re gonna get it probably in six months, I would bet. But even at 45, a lot of these companies are gonna go out of business. But you’re gonna see it higher.
Frank Curzio: I mean, there’s so much supply, no one… just the demand is coming back, states are opening up, countries are opening back up. You’re gonna see that work off, they’re cutting supplies. It doesn’t take as long for oil to really rebound when you manipulating the market, right, that’s what they’re doing. They’re cutting barrels, or they’re adding some time, it’s a manipulated market. Banks are super depressed. I love the fact that they were buying back their stock, like Citigroup, which they’re not allowed to do anymore, and some of them even with dividends. If you’re taking money, banks, some have been trading and the book value the bigger ones.
Frank Curzio: The sector I would be careful with, but on my radar. They’re a great inflationary place. Guys, it’s a deflationary market right now, like it usually is. But think Disney. Disney’s parks if I had to guess, I said this on my interview with Cheddar. If I had to guess, I would say their breakeven is 70% capacity. Everything else profits after that. I’m guessing, maybe it’s lower, maybe so… I don’t know.
Frank Curzio: Disney’s parks will never be 100% again because they’re gonna require you to have space that’s gonna take years, three feet at least, some of them six feet. So, what’s that mean? It’s fewer people they’re gonna allow, right? 30% right now in Singapore. But 80% is gonna be the new 100% because they just don’t have the land. You’re gonna have that space.
Frank Curzio: Again, I go to Disney a lot. It takes you hours just to get out of Disney to get to your car. I mean it’s lines, you gotta take the tram, you gotta take the ferry. I mean, forget it. Takes you two hours to get out of there. Everyone’s yelling at each other. They don’t show that in the commercials. The kid’s crying, everybody’s like I’m done. And everybody yelling, they don’t show that. To the family it’s nice, Disney’s awesome. Believe me, I have young kids, I know. Full day there for 9, 10 hours in the heat. It’s hot near December, gets crazy, everybody’s tired. But what is Disney gonna have to do, right? ‘Cause I’m talking about inflation here.
Frank Curzio: What’s Disney gonna have to do? They’re going to have to raise prices to compensate for that. Maybe they get, or maybe that pricing power for the parks, and I got a pricing power with streaming. Absolutely not. But Disney just one example of companies, restaurants, who are gonna have 80% capacity, right? They have takeout tables probably for the next two years. That’s a huge hit on margins. And that’s the difference between some of these restaurants and bars staying open or going bankrupt. So, what are they gonna do? They’re gonna raise prices, you’re gonna see inflation guys, you’re going to see it.
Frank Curzio: May sound crazy because we haven’t seen it, even though the Fed just put a bid on this market low interest rates, forcing people to take out debt and become more leveraged. It makes sense. Interest rates are low. It’s such a perfect environment that you have Apple and Microsoft, two companies that have the greatest balance sheets in the world, are issuing bonds, right? ‘Cause interest rates are so low, just makes sense. There is great inflation every place, which you’re probably gonna start seeing a lot of those names go higher in 2021. Even small cap growth names.
Frank Curzio: If you are Curzio Research Advisory member, I just posted a bunch of these screens, you’ll see more than 100 stocks that look attractive that are on my watch list. Also, some that aren’t attractive, including names that are likely to cut their dividends, all screens on my watch list.
Frank Curzio: So, despite stocks ramping higher here again, which is causing trading just three sectors, I’m finding lots of cool ideas. That have been unfairly beaten up, that have huge upside potential, so great risk rewards. And we’re gonna get some of those names right now.
Frank Curzio: Today’s guest is Scot Cohen. He’s the executive chairman of Wrap Technologies, close friend. So, he’s given me great advice for my business. He’s a hedge fund manager with 20 years plus experience in institutional asset management and wealth management. Runs his own $300 million fund. Very, very successful in investing in early stage companies and small caps. He takes big stakes in these companies, he helps run these companies.
Frank Curzio: And again, incredibly successful. And now his next project is Wrap Technologies. So, if you’re a subscriber to Curzio Research, you’re familiar with this name. How do I know that? Because by far, I get the most emails on it, ’cause it’s a really exciting story.
Frank Curzio: The stock was ramping higher pre-coronavirus, surging, as a signature product, it’s called a BolaWrap, which is a non-lethal device shoots out Kevlar rope and wraps someone up with hooks on them. Instead of using a taser, and taser if you have heart problems, you’re gonna die. There’s over a billion dollars in settlements that have been made that police departments had to pay, and states had to pay because of the use of taser.
Frank Curzio: This is non-lethal. Taser is quote a less than lethal device because people have died from tasers. This isn’t the only non-lethal device out there. It’s being tested in over 140 police departments, including LA and just police departments all over the world. And now it’s deployed in the field. But like most small caps, it’s stock took a pretty hard hit over the past few months, down about 35% from its highs.
Frank Curzio: So, I wanted to bring on Scot to give you an update. If you’re not familiar with the BolaWrap or Wrap Technologies, which is the company, definitely give this interview a listen. So, let’s get to that interview with Scot Cohen right now.
Frank Curzio: Scot Cohen, thanks so much for joining us on Wall Street Unplugged.
Scot Cohen: Thank you, Frank. Good to be back.
Frank Curzio: Well, we know each other for a few years now. And we were introduced by James Altogeur, who knows I covered small cap stocks in one of my newsletters. And he said, “Frank, you know what? Take a look at this product. Take a look at the guy. I’m not even gonna tell you too much about it, make your own decision.
Frank Curzio: The product is called BolaWrap.” I loved it. Most of my audience knows this device ’cause we did a big promotion around it for our newsletter. But can you explain or describe it for people who may be listening to my podcast for the very first time?
Scot Cohen: Happy to do so. For those that haven’t seen the video it couldn’t be any more self-explanatory. It is a wrap. Looks like a lasso firing out of a handheld, what looks like a launcher almost like a phone, an iPhone. And an eight foot piece of Kevlar comes out with four prongs on one side and four prongs on the other, and it simply wraps you straight up where you can’t move. Think remote handcuffs. Think remote restraint. It comes out at over 600 feet per second.
Scot Cohen: Frank, when you first, we were just talking about that, when you first use it, and when we first shot you. Those were early days. That was probably two, 2 1/2 years ago. The product has improved, so much so from the distance, from the strength of the wrap, and the consistency of the wrap. It’s wrapping over 90% of the time. So, I’m really proud of the people that helped develop this product and advance it to where it is today.
Scot Cohen: So, I hope I did a good job of explaining it. But basically, by the time you press this button, the trigger on it, you are wrapped up where you can’t move. And you can either hit a blow around the legs or that’d be up towards the waist. Remote restraint aircuffs that’s how we like to explain it.
Frank Curzio: Due diligence I did is I went there I actually got shot by this device which pretty crazy at the time. But I really wanted to see how it was when you get wrapped up, and it was unbelievable. But why do police departments need something like this when say they have taser, right? Because tasers considered a non-lethal device. Actually, it’s not as lethal now which they changed but talk about there’s been taser and why this is important to get it on a belt of every police officer out there.
Scot Cohen: Taser is a great device. It came in the late ’90s. Actually, it was available many years before that. But it really came on the scene in the late ’90s, and it’s very effective. The problem with taser, it’s a high use of force. In many states, it’s considered to be a deadly use of force. Not a non-lethal use of force, they say less than lethal. But in some states, New Jersey is one of them, where the use of force is considered to be extreme the highest level next to a gun. So, just starting from the way it’s defined on the use of force continuum, way lower, we’re talking about handcuffs grade force.
Scot Cohen: So, that’s for one. It’s a very different category of a device. Now, it’s the consistency of our product is also something you could see, google, just look up. The taser is working about 60% of the time, and our product is working close to 90% of the time. So, the consistency is another big factor.
Scot Cohen: But at the end of the day, when you’re using a taser and if it strikes you in the wrong way, and deploys in the wrong way, where it or has in the past, in fact, 12 or 1,300 people have died from it. That is gonna cause some real litigation that’s resulted in hundreds of millions of dollars of payout by state, probably much more than that I don’t have the grand total. So, even if you don’t get hurt as a result of taser, you’re being sued for just using that level of force when you should have, or when there was alternatives.
Scot Cohen: So, our tool is an alternative to that higher use of force. It gives the police officer another tool, another way to apprehend or de-escalate the situation. And that’s what’s needed right now because the police officers don’t have choices or that many choices. A gun is a choice, a taser is a choice. But besides that it’s pepper spray, and they’re going to handcuff until now. Until now you have a remote way to restrain somebody and that tool, that option is what is critical in today’s law enforcement business.
Frank Curzio: Scot, you know what it was one thing for me to look at this product and say wow, and then interview police officers, some of the top police force officers I interviewed personally. Which I got attached to ’cause they knew if they had this device, this device, it would have saved lives. And a lot of cops, almost every cop doesn’t wanna take out their gun even if it’s clean shoot.
Frank Curzio: And I just saw something recently too. It’s one thing where you look at the device and other thing look at the actual company in the stock, right?
Frank Curzio: So, what impressed me was, when I look at law enforcement officers, where I didn’t know the statistics until I talked to the police officer I interviewed and yourself, where one in 10 police encounters involve mentally ill. One in four fatal police encounters involve mentally ill. And I didn’t realize how big those statistics were.
Frank Curzio: And then today now that I know the statistics I just saw not too long ago, there was a person at Walmart, he was swinging a bat and it was a clean shoot. They tasered him. And then he took the taser off, didn’t work, and then he kept approaching. He said, I’m gonna hit people. And they had to shoot him. And for me when I look at that option, and I look at the BolaWrap option, ’cause taser didn’t work. And the fact they found out this guy’s mentally ill afterwards, it just seems like this is a product that makes sense and saves lives, doesn’t it?
Scot Cohen: That’s certainly the way we look at it. Even pulling out a taser and aiming it and someone could be it’s an aggressive… that’s an aggressive move for an officer. So, when you pull out that taser and aim, we’ve seen that in many cases can escalate the encounter. Seen many videos in police cams of situations where the taser is coming out early, and maybe even fired, and if it doesn’t stick, now, you’ve escalated to a point where the encounter’s just got even more dangerous. And there your only option is to go with a gun.
Scot Cohen: We’re suggesting there’s a choice before that ever gets to that point. There’s a choice that the officer now has before going to a lethal option. And that choice hasn’t existed until today. And that is the opportunity because that incident that you’re discussing on Walmart, that just happened a couple weeks ago. You’re right. That could have been avoided. And you know what? Nobody would even have known that happened.
Scot Cohen: None of us really knew what these encounters were like, until recently, where everybody has a video camera, so now everybody, every encounter, is being filmed. And it doesn’t look great when you’re in front of a judge. How do you think the jury is gonna feel when they see that videotape thinking, and they know there’s a tool that could have been brought out earlier that may have avoided that incident to cause the financial damage to that state and the emotional damage to that officer, you cannot calculate it.
Frank Curzio: Now Scot, it’s been two and a half years since you said it early, since I first learned about device in your company. You can say it’s a long road, maybe only two and a half years, but it is a long period of time. Talk about the accomplishments. When you’re looking at… now you have a product. Now people want it. Now you’re going to police departments.
Frank Curzio: So, now it’s whoa, we got to get our manufacturers up, a manufacturer facilities ready to go, getting the right team in place, raising cash to grow the company, and you’re even having some of the biggest names in law enforcement and even politicians strongly endorsing your product. I mean, talk about the last two and a half years of how far you’ve come because from then until now, really incredible to see your growth.
Scot Cohen: Great, happy to do so. So, two years ago, we had $3 million raise, give or take two years. So, we had roughly $3 million on our balance sheet. Before that, we had $500,000 on our balance sheet. We had a product that was really in prototype phase. Lots of things wrong with it. And started to get the a semblance of a team, mostly developmental, the stage accompany, very much developmental.
Scot Cohen: But we kept innovating, product kept getting better, we’ve been fortunate enough to be able to take enough capital, and where today, we have over $15 million in cash. We’ve been able to get in dozens of major cities, some of the biggest, best known departments, innovative departments in the country are using our product.
Scot Cohen: And here’s one very critical point of our company’s history is now we have wraps. We’re getting wraps in the field in big and small departments all over the country. And a lot of times, it’s problematic, we can’t talk about those encounters are gonna be in front of judges or there’s investigations going on. There’s a number of different situations where we cannot go and promote that.
Scot Cohen: But the product is being used. We didn’t have that. We have a stable product. We have a balance sheet. We have a team, the founder, the architect, the taser. Tom Smith came and joined us only a year ago. We built up distribution domestically, internationally. We’re not talking to small departments overseas, we’re talking to countries, countries, you’re talking about standardizing on this.
Scot Cohen: So, you wanna talk about forget about two years, how about last year, we didn’t have our product in the field. Now, we’re in over 80 departments, deployed, some of the biggest in the country. And the more and more, the only thing that’s holding that back is training and budgets. But now all of a sudden, grant monies has appeared as a result of COVID. Where now the departments are able to apply for the grant money to purchase these and to get the training.
Scot Cohen: So, with the political… and the political environment wasn’t anywhere near where it is today. People don’t want to be caged. People are judging the use of force today in their living rooms, in the media, and they don’t like what they’re seeing. There needs to be a lower use of force, an option out there for people today. That’s a difference to where we were two years ago. That’s a difference to where we were a year ago.
Frank Curzio: It’s incredible to see guys like Don Deluca, chief of police, retired, and Thomas Smith, co-founder of taser. And the thing is, I covered taser, which got me excited because I remember those early stages when it was a single digit stock trading three, four, or $5. And it’s tough to build up those manufacturing series. I remember the early orders and the stock wouldn’t do anything ’cause it was based on the orders. I mean, the orders were all over the place. So, you didn’t have recurring revenue or things like that.
Frank Curzio: But just to have somebody with that experience, to help avoid a lot of the mistakes taser made. It’s every company makes during their early growth phases, I think was huge. But you brought up the coronavirus. And how are you performing through this, right? I mean is the police department still active? Are they cutting back? How is it impacted you?
Frank Curzio: Some companies, this could be very, very rough, especially small companies like yourself. But other times, a guy like you has experience. I mean can lead some great things, right? For those who survived a black swan event like this, including AC productivity gains. Knowing how to cut costs during extreme times. Who is on the ball, right? Leadership from management employees. Have you learned anything from this? And how is coronavirus impacting you?
Scot Cohen: Good question. So, in many ways, positives and negatives. Let’s start with the negatives. The business that we thought we’d have now, it’s been pushed back. Another negative, we can’t go out and be in front of departments. We can’t be training hands-on like we have done in the past.
Scot Cohen: So, the combination of not being able to be on the road in front, both on the training and the sales front has definitely slowed down the sales cycle. I would just say slow down. And even, I mean, one of the big things is the wraps. We were getting a wrap a day in the beginning in some of the big and small departments.
Scot Cohen: But the problem was that the departments don’t wanna be wrapped. They’re not looking to wrap people now because they’re just letting them go. No one’s in the streets. If someone’s causing a problem on a lower level of crime, they’re not arresting them. They’re just letting them go because they don’t wanna take them into custody, thinking that there’s a chance he might have COVID. So, less people are being arrested for minor crimes. Domestic violence is not happening as much. So, that’s been problematic for wraps in some departments in some states, not in all.
Scot Cohen: But let’s now talk about the positives. It turns out our product is fairly self-explanatory, you can see it and see what it does. So, we’re able to demo this product remotely through Zoom. And it’s working perfectly. So, we’re still getting out there.
Scot Cohen: Grant money now is available. So, you’re getting the federal government and other grants are now available for the purchase of the devices. Okay, so that’s something we didn’t have. And now, as a result of the anticipation from increased crime because of unemployment, which always happens. Because of other economic factors that are out there, there’s an anticipation that there’s gonna be more petty crimes and, therefore, they need, again, alternatives.
Scot Cohen: So, we’re being contacted. They’re contacting us; countries from all around the world, and departments here in the states, reaching out to us, asking us how we get this, how we get trained, how do we get devices, we’ve never quoted, we’re quoting this on a… We’ve never quoted the devices more than we’re quoting now.
Scot Cohen: So, it’s telling me something, it’s telling me there’s more interest. There’s anticipation that there’s going to be an environment with more crime is gonna take place. And now, there’s money to pay for these devices. And there’s a real willingness from departments and countries to wanna get this out there, like we’ve never seen before. It’s accelerating all the work that we did last year, the year before, we’re starting to see the benefits of that ’cause now, people the phone’s ringing, the calls are coming our way. We’re not having to go out to them. Which is very different from where we were even four months ago.
Frank Curzio: And I know from covering your stuff that you’re in 140 plus police departments, they receive the product thus far. But you mentioned briefly about internationally, ’cause I know this isn’t just a U.S. story. In fact, when I look at it, I think it might even be… maybe not bigger, but a huge international story because the laws there, especially in Europe, when it comes to carrying guns for police officers is a lot different, right?
Scot Cohen: Very different. Let’s just take the UK as one example. In the UK, I think the number was 35,000 knife incidents, violence with knives. And the police, they’re not carrying guns in many cases. So, when somebody brings a knife, when there’s a knife involved in an encounter, does it make sense to start out with a gun in that situation? Well, it depends if it’s aggressive or not.
Scot Cohen: I’m not trying to weigh in on how they deploy use of force. But if they’re not comfortable with their tasers, and if guns, many of them don’t have guns, what are the alternatives? This has been the first alternate taser, and so in Europe, in overseas, they don’t have guns, and many of them don’t have tasers because their countries have laws against. They look at it as a human rights issue. So, without guns or tasers, they’re using handcuff, goalie cobs, and pepper spray. Guess what? Now they have an option.
Scot Cohen: And that’s an opportunity for us ’cause almost every department of state, people have guns. Well, that’s not the case overseas. And in fact, it’s totally taking a step back, they not only have guns, but many of them don’t have tasers. So, this just becomes a beautiful opportunity for us to step in with a solution. And that’s why we’re being so well received over there. The sales cycle is a little longer, obviously. But it’s not just gonna be 10 units or 100 units, you’re talking about much bigger opportunities when countries embrace the tool.
Frank Curzio: Now, it definitely makes sense and it just to me and speaking to you a lot, I mean, you’ve helped me so much even with my business, being able to pick your mind in so many different things and been such a good friend. But just hearing those stories and some videos that you send me where, think about it, if you don’t have a gun and somebody has a knife, right? And you’re a police officer. The guy is swinging a knife at you, what are the options? I mean taser, if they using it, or a wrap or something, or, just when you have a gun, I never knew that. I mean, that’s pretty scary just when you think about it. But I wanna–
Scot Cohen: You were involved in taser early, okay. You were there for the ride it went from $5 to $105 in one year. They had a couple incidents, it took from 500 units, to 2,500 units, to 9,000 units. To jump from 2,500 units to 9,000 incentive stock up from $5 to 105. I’m not saying we’re gonna do the same thing, but that opportunity is out there for us. And I think once you get one or two big countries or departments to take this on and go full deployment, departments here in the states, small and large, the amount of people that will be putting us on the belt gets in to massive numbers.
Frank Curzio: Now, you have well over two decades of experience. You’ve brought a lot of companies public, you’ve been part of a lot of companies during their early phases, which is why with us occurs, your research, I lean on so many different people, you’re one of them to really help me out. Again, you need those people with that kind of experience that you trust, and you’ve been amazing for me.
Frank Curzio: But since you’ve been part of a lot of companies involved during the early growth phases, as I say entrepreneur, leader. We all have winners and losers that we invest in, right? It happens to everybody. But what makes Wrap Technologies different, or what do you see in this company that has you so excited compared to a lot of other companies… successful, that even been successful with or not so successful with?
Scot Cohen: Let’s start at the top. It says there’s a massive social element here. You are providing a tool where the world can be a safer place. There’s been such debate about policing and it won’t stop. And some of the most watched TV shows are about crime. And so, and that’s just not here that’s overseas, as well.
Scot Cohen: So, to be able to come in and have an impact, an impact with a product like this in law enforcement, which ultimately saving lives, it’s just a great, it’s an amazing feeling that’s hard to articulate. But it’s something to know you’re doing good for society. You know you’re gonna make society a better place. And the world a safer place with a tool like that. It starts there.
Scot Cohen: The insider ownership here, myself, Woody, Jim, and David we own half of this company. So, we put up our money. And it’s unusual to have a company that has 50% insider ownership. So, that’s an element that I always look for, and most companies I get involved with, you just don’t have the executives that had this kind of success in their lives to be able to maintain that kind of position. And one thing that you just have to understand, it took taser 30 years to get to where they are today, and maybe even a longer. Tom, I think 30 years, him and his brother involved. It’s taken us four years, which to some it might seem like a long time, but we’ve accomplished more in these four years. I think Tom said it took taser 20 years to do what we’ve done in two.
Scot Cohen: So, when you think about this, it’s been that long for a new device to come along that could have impact on law enforcement, that’s a beautiful thing. There’s nothing else coming. Maybe there will be a couple years down the road or five or 10 years. We don’t hear of anything else that’s competing with this device. So, when you don’t have competition for a product, and it’s just blocking and tackling time, policy, training, education, and that is the biggest risk, you better have a balance sheet to wait it out.
Scot Cohen: But when it happens, it’s gonna happen big, it’s gonna happen in a flash. And all our shareholders will be rewarded. If you own one share, 100 shares, 1,000 shares, or 100,000 shares, it doesn’t matter. We’re just at the beginning, even though four years doesn’t seem like the beginning, but when this takes, and there’s that one incident that’s caught on national television, and everybody’s talking about why doesn’t every cop in my town, or in my city, or in my state have this device, when that conversation starts happening, you know we’ve made it.
Scot Cohen: And our stock will not be at $4. It will follow suit of tasers $100. And I would like to believe that we could do much more because it’s got broader appeal. It’s got broader application. It’s safer, it’s more appropriate for today’s environment. That’s what it is.
Frank Curzio: And I could tell even from your excitement to knowing you for how long and you being involved in this project is great. So, I guess I’ll finish with this, what are some of the next steps? I mean, you briefly touched upon this. But in terms of growing the company, say over the next 12 months to 18 months, right, I mean, say the coronavirus okay. People lockups, lockdowns, whatever you wanna call them have ended. Most of them people are going back to work slowly, assuming, say we get a vaccine or even nine months from now, I’m pretty sure that you’re gonna be able to really go to these police departments and train these people again. So, what are the growth plans in terms of over the next 12 to 18 months for you and Wrap?
Scot Cohen: Continue to support the distribution network, we did over 60. In the last six months, we did over 300 because of the distribution networks. We basically effectively have now hundreds of salespeople versus only three, this time last year. So, support that network. Get more chiefs talking about their success with the wraps. Remember, we were just talking about the chiefs were only able to talk about them bringing the product and demonstrating it and them hoping they were gonna be able to deploy the product in the future.
Scot Cohen: Now, we have deployments and success stories. We need to press that. We need more of those. And that’s happening now. And it’s gonna continue to happen. And then we need to continue to train, beef up training even more so, and think about smart partnerships in the future. People that we can sign distribution deals with. People that we can partner on technologies with, complementing the tech that we have. The key asset is being on that belt. And once you’re on that belt, you can go in many directions and there’s companies, big, lot larger companies than us that are very interested in that real estate and know that we’re getting ourselves that real estate right now. And they wanna be positioned with us.
Scot Cohen: So, I would look for partnerships in the future. I’d look for more wraps. And obviously, you’re gonna see sales reflect in those numbers. It’s all just math from there.
Frank Curzio: Well, Scot, listen, we went through a lot, we covered a lot. I usually like to keep this 20 minutes, this went a little bit longer because just learning. I want everybody to really learn about this because for me, the biggest thing is, when I went there, it was about the stock price.
Frank Curzio: By the time I saw you interview police, it was personal to me. And it really touched me in terms of interviewing these police officers and knowing that just seeing their faces. And it wasn’t a joke as these people who don’t wanna take out their guns. And said, wow, this would have saved lives and just interviewing them seeing them. I didn’t expect to get emotionally attached to it.
Frank Curzio: But even as an investment, which this podcast is about, I think it’s amazing. We’ll bring you on at a great price here. Just learning so about this and really get attached to it, I really appreciate it, it was great meeting you. And I love the success that we’ve seen over the past two years since we first really went out there and started recommending this stock. So, I really appreciate you coming on buddy.
Scot Cohen: Frank, you were one of the first guys to cover us, and you were one of the first to pick up the story. I’ll never forget that. And at this moment in time, this is such a, this is the opportunity. And there is so much more clarity, than we were a year ago to today. So, thank you for your support. Thank you for recognizing, seeing the difference in this product in what could make us a tremendous success. So, I thank you for spotting us, and I thank you for staying connected with us. I appreciate that.
Frank Curzio: No worries, buddy. All right, and I appreciate coming on and I’ll definitely talk to you soon. Thanks man.
Scot Cohen: Okay, thank you, Frank. Be well.
Frank Curzio: Okay guys, great stuff from Scot. And quick disclosure: I’m long Wrap. I got it about two years ago. I don’t plan on selling this anytime soon. Because I believe in the growth model. I believe in the story, it’s a device that saves lives. I mean, the product, which is a much better alternative than taser, and so restraining people with mental health problems. It’s such a big issue.
Frank Curzio: One out of every four calls in New York is mentally disturbed problem. And these are people that could just come at you and walk at you with a weapon, and some of them have heart problems and tasers. Sometimes tasers don’t work. Like I described, the guy for Walmart got tasered just pulled it off of him and start swinging. What do you do? You got a gun, that’s it, it’s all that’s left.
Frank Curzio: This wraps you up, shoots fast as a gun, that new technology coming out. They’re looking at it, I got shot by this device, it’s very, very loud, extremely loud, like a gun. So, they’re working on the noise aspect because shooting this thing in the city might scare the hell out of people. So, you also want things that are quiet.
Frank Curzio: And just interviewing some of the top police chiefs, police officers, 30-, 40-year vets. I mean, I really got the story. I wasn’t kidding; to me it was emotional. I was like, wow, it’s tough being a cop.
Frank Curzio: I know right now if you’re in the media, especially millennials, cops are the enemy, they’re the worst. Guys look, 3% of them are assholes, we all know. But most of these guys, I mean, they risk their lives every day, and they don’t get paid a lot of money. And they just get shit on basically. And it’s terrible. And I have a lot of friends, and I have to tell you, it probably 15 to 20 I grew up in New York. I would say about 5% of them are a-holes. The rest of really good people.
Frank Curzio: They help people, they love their job. They used to love their job. But just to see, I mean, nobody wants to pull out their gun even if it’s a clean shoot. I mean, that’s gonna impact you forever, taking somebody’s life, even if it’s a clean shoot.
Frank Curzio: So, when I see this, this is something that I got attached to. From a stock perspective, I like it a lot. But look, don’t go all in on this stock. I mean, Scot is an upfront guy. He said he highlighted the risks. There’s a lot of travel involved and training involved, which they’re going through, which has been halted. But you’re still seeing this deployed, you could still see lots of orders coming in.
Frank Curzio: But it is a small cap. Yes, it has huge growth potential, but it’s generating little revenue right now. So, only put money in it that you could afford to lose. And you can even limit that by putting a stop on it. But just be careful. It’s not a guarantee. I mean, I mentioned during the interview, I followed taser from its early growth stages, back in the Kramer days.
Frank Curzio: By far one of the biggest… I would actually say it’s the biggest roller coaster ride I’ve ever seen in the stock that I recommended. I mean, this stock went from three to eight to four to two, we were adding back and forth and just… but eventually, the long-term story made sense. And now when you look at wrap today, the model is the same. I mean it’s a device similar to taser, it’s gonna save lives than using a gun, helps police officers in very tough situations.
Frank Curzio: And the fact that they got the co-founder of taser as president. I mean he’s helping this company. He’s helping wrap avoid the mistakes taser made early on. Because it was just no news flow for two months, and it’s easy to short the stock. And then they say 150 orders from this police department. Then it might take another month and they say, a thousand orders and 1500, 10,000 orders and no orders for two, three months. There’s no recurring revenue, recurring orders all the time. So it’s really difficult, and you saw the move in the stock. But eventually it made sense.
Frank Curzio: I wanna thank Scot for coming on, really great stuff. Again, he’s helped me tremendously in my business, just being able to pick his mind as well as several other people I really, really respect. A lot of these people are all subscribers too that I got to meet so that’s why I always encourage you guys to email email@example.com, let me know what you thought.
Frank Curzio: Again, be careful. It’s a great stock, we have it in our portfolios, I think it has tremendous upside, I don’t wanna bring Scot on with this stock trading at all-time highs. No, it’s trading at a lower level, it’s a pretty good price. But again, if you’re gonna buy it, just be careful. Just put a little bit of money in it, don’t go crazy.
Frank Curzio: ‘Cause a lot of small caps you’re gonna see make their way into both of my newsletters. One Curzio Venture small cap, and Curzio Research Advisory is mostly large cap to mid-caps. But you’re gonna see small caps make it into both of those newsletters, because that’s where the opportunity is. This is the sector that’s down the most. A lot of these companies have still gotten crushed, and they’re starting to get back… not to normal, but you’re gonna see that growth start again, which is why a lot of those small caps are trading at such high valuations. That’s where I’m looking right now.
Frank Curzio: Let’s move on to my educational segment. I post a live video on my Twitter feed, you’re free to tweet me at Frank Curzio, on Moderna. The company that you should know by now, right, on Monday posted positive phase one results for its COVID-19 vaccine. Everybody went crazy, the market surged 900 points on that news. And also the Fed, day before said, hey, we’re gonna put a bid on the smart. We could do whatever it takes yes.
Frank Curzio: Okay, kind of factored in already, with three trillion in the queue. But it was mostly the Moderna news that pushed the whole entire market higher on Monday.
Frank Curzio: Now, Moderna was already up huge. It went from $17 in January to 60 before these results were announced on Monday. And after they announced them, it surged another 20% on the news. And the stock went as high as $80 a share, giving it a market cap of more than $30 billion. 30 billion market cap. Moderna does not have any FDA approved products. They don’t have a product on the market. Generated 51 million in sales over the past 12 months, right, through milestone payments and things like that. But if you’re looking at price to sales, this company is trading at 575 times sales.
Frank Curzio: And people say Square, which is a company I like, is expensive. It’s expensive and you saw a couple downgrades sort of performing well. This a company that’s trading at eight time sales, and Square is expensive. Moderna, trading at 575 times sales.
Frank Curzio: Now, Moderna did the smart thing, gotta give management credit. One day after releasing this news the stock get trading at 80. It announced a huge secondary offering. 17 million shares at 76. So, they raised about $1.3 billion, okay. That was yesterday, that was Tuesday.
Frank Curzio: Now late Tuesday, leading infectious doctors started questioning the data, since everybody was just listening to the CEO, who talks a great game, has always talked a great game. Moderna’s got great technology. It’s a good company. It’s raised a lot of money. One of the most capital raises in biotech over the past three, four years, RNA technology. But the CEO is known for being very highly promotional.
Frank Curzio: But when it comes to biotechs, it’s about the data. And when they looked at data it’s okay. And so he was like, hey, it looks like we’re gonna have something to the market by the end of this year. And they’re like, no, you’re not. I mean, phase two is gonna take a while and phase three is gonna take a while. Again safety, efficacy, all this stuff where these results were okay. Not to mention, not to mention, right? They’re using RNA technology, won’t get too technical. Basic use of proteins help cells fight against diseases, revolutionary technology, a lot of companies are into it. But this technology, specifically RNA, it’s never been used successfully to create a vaccine, ever. People just assuming magically.
Frank Curzio: Again, it takes four years was the quickest we brought a vaccine to the market. Four years, that was mumps. It was 1967. Now, brand new technology are really assuming that it’s gonna be less than a year? Are you crazy? It’s gonna be less than nine months. I hope it is. I hope they’re right. But this company of 30 billion is pricing in that this thing is already approved being distributed like crazy. So, now what happened? They did the offering at $76 yesterday. It stopped trading at 70 today. It was at 80 and people were like, 76, all right, I’m in, that’s cool.
Frank Curzio: Morgan Stanley was the main underwriter, the lead underwriter. Now, it’s trading at 70, already down the stock. And so it shows people buying in. They got a great deal 76. Maybe it will on long-term, I don’t know. But let’s look at the forecast really quick because this is where things get interesting.
Frank Curzio: So, Goldman Sachs is very positive, everyone is very positive, the analysts are positive. I see this with biotech all the time. When you see biotech, the best advice I can give you is sell enthusiasm. Stocks move higher through phase one and phase two trials, when they get approved, then they may do after they get FDA approval.
Frank Curzio: Human Genome Sciences is a perfect example that stock went to $30 a share. Partnership with Glaxo only join the market to treat lupus. As soon as it got approved by the FDA, everybody thought sales will ramp up, it takes a long time. You have doctors and scientists. Now, you’ve got to turn in to real company manufacturing, distributing. Doctors don’t know a lot of this stuff. You got to hire sales teams, signed deals, collaboration, to try to get this drug out as quick as possible, and next two years stock went to eight.
Frank Curzio: That’s where we recommend it, it’s in phase one. It was like 2012. And got very, very lucky, three weeks later, got taken out by Glaxo for three billion, it was like a 60-70% gain. But the enthusiasm behind this stock at $30 billion without an FDA approved product with a history that has a checkered past.
Frank Curzio: And now going through reports here, guys, and I read this stuff. You guys don’t have access to this stuff. I’m gonna show you. Because Goldman has $105 target price on this. Love the results, it’s great. It’s awesome. This is right after they released. So, they see revenues going from the past 12 months is $51. But if you’re using a year to year basis it’s 62 million. They see revenue going from 62 million to 8.4 billion in 2021, next year.
Frank Curzio: And then 10 1/2 billion in 2022. I’ve never seen anything like that in my life. And I know if you produce this, and you do the numbers and how many people are gonna take it, depending, it could be five billion people, or again, if it’s something that’s mumps, rubella, measles, that you’re not gonna have it at all, you’re gonna see much more people take it compared to when we trying to get the strain right for the flu. And 30% of it works, but not everybody takes it. Big difference in revenue. Goldman Sachs $10 billion in sales, $8 1/2 billion next year, and they’re not even phase two yet.
Frank Curzio: Now, it gets even better. So, BMO, they also have a buy rating on this. And I love this. This is awesome because they have a discounted cash flow model, which they all do, right? They push out the years discounted cash flow, stay with me. BMO says that their DCF, discounted cash flow model, includes risk adjusted cash flows through 2034. Who knows if Earth is gonna exist then? 2034, it’s 2020, 2034. That’s how much their model goes out for.
Frank Curzio: So I said, all right, let’s have some fun. Let me see what these numbers are. And when I look at their numbers, they’re saying by 2027 and even they’re going up to 2030. So you look at these numbers, sales are expected to go to 2023. 2023 they have 6.7 billion, okay? That’s 2023. Goldman has next year 2021 and a half. But then they have 2030, that this company is gonna generate $30 billion in sales.
Frank Curzio: $30 billion in sales, you’re gonna have to give some of that away ’cause they’re working with the government, right, to fast track this. But even better, which I love is by 2030, I’m just having fun with this ’cause this is really cool. 2030 cash and cash equivalents are gonna be $106 billion on the balance sheet. Just putting that in perspective, Apple, the greatest company in the world 250 billion. It has 94 billion in cash on its balance sheet right now.
Frank Curzio: Moderna no working drugs phase one approval with much larger competitors trying to bring a vaccine to the market $106 billion on its balance sheet in 2030. It’s awesome. I mean, just to see some of this is crazy. But my point of this segment, and by the way, for those who own Moderna… great results. I believe in them. It’s awesome.
Frank Curzio: Management, I’m not too sure if they believe them. Give me the CFO, Lawrence Kim, just sold 260,000 shares from the 15th to the 18th. So, three days, right? Right before that announcement came out. Pretty cool, right? Sell a lot of shares. I guess you’re not as optimistic as BMO or Goldman Sachs or the other analysts, that’s okay. Lock in a couple million dollars for yourself, you’re good. Why am I bringing this up? Because you’re seeing vaccine companies, it’s a crazy market. Based on this data, and the companies that are using that RNA technology, those companies should have got murdered. You see that all the time with biotech.
Frank Curzio: If a company comes out with something that’s positive on a certain drug, and it’s better than the one that’s currently on the market, that company usually gets hit. You get 10, 15, 20%, sometimes. As the company with the data, just reporting maybe it’s phase two or positive data, it will go up 30%. And there’s a limited market, right? There’s always a limited market for this. It’s a total addressable market. If you’re coming first to market, you’re gonna take most of that market, which means a lot of the other vaccine companies are gonna be in big trouble. Maybe a couple of other ones bring a vaccine, they trying different vaccines.
Frank Curzio: Again, whatever. There’s different drugs for every disease out there. But the fact that this is a different circumstance and a vaccine coming to market is gonna be distributed immediately to as many people as possible as soon as we get that okay, it’s gonna be hard for these other companies. But you’re seeing the whole biotech sector and all these vaccine companies. I mean today in OVIOL, which I’m very familiar with, decent company. Little shady past, and very promotional, positive clinical trial results and stock search, clinical results. I mean, pretty crazy. And so this is a market if you’re getting into biotechs and I listed in the screens the CRA, that the pure plays, okay, the pure plays.
Frank Curzio: So the Moderna is about I think there’s about 15-20 stocks on that list that are pure plays. Meaning if they don’t get the vaccine, these things are going down 70, 80%. You should take a look at that and buy a basket of these if you’re gonna go in and use money that you could afford to lose. ‘Cause everything’s exciting right now. Everything is cool. You hear on TV, biotechs is great. I covered this sector for a very, very long time, guys. A lot of these names… it’s only be one, maybe two, maybe three, I mean, four companies dominate the entire vaccine market right now, four major companies.
Frank Curzio: So, take four, maybe they come up with a vaccine, a couple of vaccine, whatever. The rest of them, especially pure plays, are gonna get murdered. Just understand that risk reward going in. ‘Cause right now nobody cares. Just coronavirus and decent results. How can Moderna go on TV and people won’t even look at the data. They didn’t even look at the data.
Frank Curzio: You heard that by the end of the day Monday that Moderna came out with those results by Tuesday afternoon, late afternoon, when analysts and professionals and experts in that field, infectious diseases, started looking at the data, like, wait a minute, this wasn’t that good. It took a day and a half, and they’ll look at data and the market didn’t care, reacted and say, wow, this is great. We’re gonna get a vaccine a couple months. No, we’re not. No, we’re not.
Frank Curzio: When it comes to biotech guys be very, very careful. I spent a little bit more time than expected but I just wanna put in perspective. I have access to a lot of research, a lot of great biotech analysts. A sector I covered for a very long time. Did very well investing at biotech for my subscribers and myself over the years, past 20 years. But right now, risk reward, it’s very, very dangerous. There’s only gonna be a couple of winners. Not all of them are gonna be winners, especially the pure plays, and you guys know which ones they are, you invested in them. Just be very, very careful.
Frank Curzio: Okay, guys you wanna see more of Frank Curzio, which you probably don’t, you can on my Curzio Research YouTube page. And I was just interviewed on Cheddar, a good seven minute interview talking about TikTok and Disney and the problems with Disney.
Frank Curzio: Amazing that a key executive, his name is Kevin Mayer, head of Streaming, which Streaming’s the greatest, he left Streaming. I mean, some of you say wasn’t surprised he’s got passed over the top job. But if Streaming was really that great and you’re gonna make that much money off of it, I think he would have stayed. But he went to TikTok. A company that’s growing tremendously but has a lot of regulatory problems, a lot. The U.S. is all over them.
Frank Curzio: So, what did I say about Disney? But a lot of these interviews, you’re gonna be able to see on Curzio Research YouTube page, very, very good stuff, radio stuff. And also feel free to tweet me @frankcurzio, that’s my handle. Like to post on Twitter a couple times a day, two, three times.
Frank Curzio: I also do live videos. Try to do them every day. But sometimes it gets a little busy. I’m writing newsletter and doing some research. So I would say at least three times a week, you’re just gonna see live videos. I’m gonna try to do a little bit more than that. But those are two of the outlets that you could find me on.
Frank Curzio: So guys, a lot of stuff to digest. Let me know what you liked about this podcast because I know the stories are cool. You’re bringing in stocks, bringing CEOs, things like that. But the GDP story is very, very important. I want you to understand it. Hopefully it wasn’t too boring for you and also getting really into numbers Moderna.
Frank Curzio: Again, I could break it down even easier for you to talk about different things. But those are two big, relevant events because those numbers for GDP for Q2 just went down tremendously, expect a 40% decline now. And Q3 and Q4 got lowered across the board that we’re gonna see negatives, very, very important because this market is trading, as everything’s gonna be good in the second half. Obviously, it’s not. And hopefully it’s gonna rebound in 2021. I don’t know if that’s on the table. So, our Q2, Q3 Q4, now it’s 2021, Q1. Let’s see if it happens, I don’t know. We’ll see.
Frank Curzio: And also Moderna, that news drove the markets higher, even though a lot of this is saying that it’s full bullshit. But the markets went up, and it came down Tuesday, another bouncing back up on Wednesday. So, you really get that premium from the Moderna news.
Frank Curzio: So, again, I wanna talk about relevant things that are very, very important. Just give you my opinion, which is normally different than what you’re hearing on TV. But let me know what you liked and didn’t like. And you could do that by emailing firstname.lastname@example.org. Guys, thanks so much for listening. I really appreciate all the support. I’ll see you guys in seven days, take care.
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