Would You Like To Know More #3

Forgive me here for talking my book this week. I am long biotech innovation and uranium miners these days and want you to be aware of that before you dig into the third installment of Would You Like To Know More.

1. Biotech Is Back Baby!

SPDR’s Biotech ETF XBI which is weighted to include more speculative small and mid cap biotech companies surged to fresh ATHs. The move came after news that JUNO and BIVV were being bought out for what this author believes are absurd prices. BIVV was bought out for 10x annual sales. Yes the sales are growing and the company will likely do some price hikes once they get their hands on the drugs, but the field in which BIVV’s drugs compete is quite crowded. This kind of crazy deal making has set the market ablaze.

For now M&A may be driving renewed sentiment in the space, but a weaker USD also makes domestic biotech companies more attractive for foreign acquisitions. We’ve already see Chinese biotech companies sign a multitude of licensing deals with US biotech companies and Sanofi, who acquired BIVV, is a French company. But the most important long term of this space, that has yet to fuel a stampede of generalists is innovation, and we think it’s coming, in a big and yugely way.

2. Are US Uranium Producers Set To Benefit In The Trump Era?

Trump announced some minor tariffs this week on solar panels. Mike here notes that this is a boost to domestic US “energy” companies and that uranium could easily fall in this wheelhouse. US imports +90% of its uranium required to satiate its aging power plants. Recently Energy Fuels Inc. a domestic producer of uranium with multiple US located mines ready to go into production, is trying to invoke on the grounds of national security that the US secure a consistent supply of domestic uranium.

Given that Uranium fuels 20% of the electric grid, it’s not unreasonable at all. And more importantly, with uranium supply under contract (shown below) at US utilities falling sharply over the next few years it’s a realistic possibility.

3. Is Microsoft leading the Quantum Computing race?

It’s not too difficult to make a physical qubit these days, D-Wave has strung together thousands of them. The trick which has evaded and continues to evade scientists is keeping the qubits stable throughout the computation and measurement processes.

The man who invented D-Wave’s qubits (classical sized superconducting loops) did not even bother to patent the technology because he believed the interference would be too high. Ironically, the scientist was right about the high levels of interference, but D-Wave was still able to use these qubits, as they put it, “to find a better answer faster.” D-Wave has sold and shipped its systems to the likes of NASA, VW and others.

In order to correct for these massive swings in interference, D-Wave needs to build in orders of magnitude more qubits to error check the other qubits. Or said another way, it takes 100s of physical qubits to create a single logic qubit. Although D-Wave says its system has 2000 “qubits” the majority of these qubits (~99%) are used to reduce the error of the final result. Adding these extra qubits requires more computing resources algorithms and energy to process and still your answer will likely have to be rechecked a few times. In short, the stability of the individual qubits remains a major major problem.

Microsoft, it seems, has figured out a way to create much more stable qubits than anyone else can. Researchers at the company have developed topological qubits which are much more stable than any previous iteration. Many scientists have actually questioned whether or not these qubits are even real…  Here’s an excerpt from the article which was written in 2016 (my emphasis in bold):

“IBM, Google and a number of academic labs have chosen relatively mature hardware, such as loops of superconducting wire, to make quantum bits (qubits). These are the building blocks of a quantum computer: they power its speedy calculations thanks to their ability to be in a mixture (or superposition) of ‘on’ and ‘off’ states at the same time.

Microsoft, however, is hoping to encode its qubits in a kind of quasiparticle: a particle-like object that emerges from the interactions inside matter. Some physicists are not even sure that the particular quasiparticles Microsoft are working with — called non-abelian anyons — actually exist. But the firm hopes to exploit their topological properties, which make quantum states extremely robust to outside interference, to build what are called topological quantum computers.”

And actually if you go back to 2014, Microsoft researcher, Krysta Svore, talks about all the challenges they will have to overcome in the next few years. To see how far they’ve come in such a short period of time is truly remarkable.

DISCLAIMER: This blog is the diary of a twenty something millennial who has never stepped foot inside a wall street bank. He has not taken an economic or business course since high school (which he is immensely proud of) and has been long gold since 2012 (which he is not so proud of). In short his opinions and experiences make him uniquely unqualified to give advice. This blog post is NOT advice to buy or sell securities. He may have positions in the aforementioned trades/securities. He may change his opinion the instant the post is published. In short, this blog post is pure fiction based loosely in the reality of the ever shifting narrative of the markets. These posts are meant for enjoyment and self reflection and nothing else. So ENJOY and REFLECT!



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s