You know what’s cool about this bull market?
There are so many ways to make money. It’s not just MAG7 anymore.
Let’s review the Global Factor Model and see what’s going on.
YWR Global Top 25
Sometimes I question the usefulness of the YWR Global 25 when it’s full of so many China A-shares or South Korean stocks which are difficult to trade. Maybe it should just be US and European tickers, where it’s easier to make money. But I decided it’s still good to know what’s going on globally. Like with 3SBio.
I haven’t talked about them, but every month there are always a lot of Chinese biotech or pharmaceutical companies ranked highly in the factor model. It’s worth flagging what’s going on. In summary, China is taking over drug manufacturing, the same way it took over every other manufacturing industry.
For example, Pfizer is paying 3SBio up to $6bn for the global rights to sell their SSGJ-707 bispecific antibody. The drug was developed and tested in China. Now that it is ready, and the hard work has been done, Pfizer comes in and buys the global rights. China does the development then Pfizer does what it does best. Pfizer puts a nice trusted US brand name on SSGJ-707 with a 1-2 punch of mainstream media controlled adverting and a network of beautiful sales people to visit doctors. Drugs are becoming like everything else. You design it in the US or Europe on a computer, then when you want to make it real you go to China.
Today’s deal boom has roots in efforts by the Chinese government to upgrade the country’s biotech capabilities by upping investment in technological innovation. In the life sciences, the initiative provided funding, discounted or even free laboratory space and grants to support what Li described as a “robust ecosystem” of biotechs.
The results are clear. Places like Shanghai and Suzhou are home to a skilled workforce of scientists and hundreds of homegrown companies that employ them. Science parks akin to the U.S. biotech hubs of Cambridge, Massachusetts and San Francisco have sprouted up.
Chinese companies generally can move faster, and at a lower cost, than their U.S. counterparts. Startups can go from launch to clinical trials in 18 months or less, compared to a few years in the U.S., Li estimated. Clinical trial enrollment is speedy, while staffing and supply chain costs are lower, helping companies move drugs along more cost effectively.
“If you’re a national company within China running a trial, just by virtue of the networks that you work within, you pay a fraction of what we pay, and the access to patients is enough that you can go really fast,” said Andy Plump, head of research at Takeda Pharmaceutical. “All of those are enablers.” Source: Biopharma Dive
If you want the picks and shovels, Foxconn type play on contract manufacturing for drugs, it’s probably Wuxi AppTech, Wuxi Biologics, and Wuxi XDC. I ran a free YWR Intelligence report for you on Wuxi AppTech to get you going.
Big Factor Trends
Like I said above, when you scan through the rankings either in the Google sheet or the Retool data app (links at the bottom) there are so many different trends. Here is a summary of some of what I’m seeing.
Broadening out of commodity rally. Gold miners have the strongest estimate momentum globally. Nothing compares. But this is broadening out to include PGM’s (Impala, Valterra) and now copper and aluminium. For example, we see copper miners like MMG Ltd, Hubdbay ($HDB), Jiangxi Copper, Sumitomo Mining, and Atalaya Mining scoring well. Then we have aluminium plays like Alcoa ($AA, Century Aluminium ($CENX) and Aluminium Corp of China. Keep an eye on Glencore, especially if this trend spreads to the energy complex.
The Bull market in Memory. This is across the board. SK Hynix, Micron, Samsung, Western Digital, Sandisk, Seagate.
Pharmaceuticals and biotech. Improvements in the Medicare Advantage benefits for specialty drugs which kicked in this year have led to big surprises in the earnings for drug companies like Sumitomo Pharma. We had to figure this out on our own, because for much of this year the drug companies themselves didn’t know what was going on (A Factor Model Mystery).
AI supply chain. The great thing about the AI-data center build out is the beneficiaries are everywhere. You see lots of hardware companies in Taiwan (TSMC, Hon Hai, Wiwynn, Delta Electronics) and Japan benefitting. But it’s also in power generation, utilities and cooling systems.
South Korea is on fire, almost across the board. They are catching the memory chip trend, plus ship building (HD Heavy). The bull market in the South Korean tech industry means Korean brokerage stocks are doing well too.
South Africa is scoring well. We’ve talked about the EM cycle and how it starts with stabilisation of the currency, which leads to lower inflation, then lower interest rates, which finally feeds through into equities and the economy. So you see MTN (African mobile and payments), Motus Holdings (auto dealerships), Old Mutual Insurance (OMU-LN), First Rand Bank and Sasol ($SSL) all scoring well. Sasol is so beaten down. The next big EM market everyone is watching is Brazil.
It’s not a massive trend yet, but oil refiners are starting to score well. HF Sinclair ($DINO) Par Pacific ($PAFF) and Valero are the top ranked ($VLO). I own PSX (but have forever).
No one talks about it, but airlines are doing well (Air France, Delta, United Airlines, RyanAir, Japan Airlines, Quantas, British Airways IAG-LON). Airlines are benefiting from the manufacturing problems at Boeing and Airbus. This time around things are good and the airlines can’t ruin it for themselves with too much supply.
General Motors. It’s only one stock, so far, but I think this is a big trend everyone is overlooking. Tariffs, rise of US manufacturing, elimination of fuel efficiency penalties… doesn’t this all massively benefit the US auto manufacturing industry? If this $13 estimate is right for 2027 GM is on 5x. It’s what we’ve been saying about the broadening of the bull market. Over the next 3 years you’re probably going to make more money in GM over Microsoft. But I know that seems insane and not what anyone would ever do.
Top 5 Industries
Gold (and now platinum miners) are the biggest trend in the market. This is commodity trend is broadening out so now we see ‘Other Metals’ as the #3 sector. Both of the sectors are not well owned by the hedge funds.
Industrial machinery is mostly semiconductor related companies like Lam Research, and Axcelis $ACLS, but also renewables machinery like Enerflex in Canada and hydraulic solutions like Helios Technologies.
And remember whenever there is a company you don’t know, just click the blue AI button and run a quick report.
When we look at the monthly trends we see how well how many of the top ranked stocks are gold miners. It’s a trend the hedge funds have completely missed. More of a boomer bull market.
Notice also the growing momentum in industrial machinery.
I still like them, but banks have dropped out of the top 5.
Top 5 Countries
China and the US are again the top ranked countries. As you can see in the monthly data below the leadership flips back and forth, but they are always #1 and #2. Global investors own one, but not the other.
The gold mining trend has pushed out South Korea and Taiwan from the Top 5, so now we have Canada and Australia.
Everyone says Japan is dead, but it scores really well every month and is almost always in the top 5. I feel like we don’t give Japan the attention it deserves. It’s a super big, liquid market which anyone can trade. And the Japanese banks are waking up (The Godzilla Trade).
Below are links to the Data App on Retool with the super cool AI reports button. There is a link to the rankings in Google Sheets if you want to play around with the numbers and import them into something else in your process. Finally, there is a also a link to the Tableau Dashboard with the famous Price-Estimate Momentum Scatter chart.