I’ve been a trader and investor for 44 years. I left Wall Street long ago—-once I understood that their obsolete advice is designed to profit them, not you.
Today, my firm manages around $4 billion in ETFs, and I don’t answer to anybody. I tell the truth because trying to fool investors doesn’t help them, or me.
In Daily H.E.A.T. , I show you how to Hedge against disaster, find your Edge, exploit Asymmetric opportunities, and ride major Themes before Wall Street catches on.
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Table of Contents
H.E.A.T.
The clean way to frame the 2025 biotech melt-up is this: Big Pharma has a revenue replacement problem (the patent cliff), and internal R&D simply can’t fill it fast enough. When the clock is ticking, “build” becomes a luxury — “buy” becomes the default. That’s why deal flow has felt relentless: Merck (MSD) agreed to buy Verona Pharma for ~$10B (shareholders approved at $107/ADS) to add a marketed COPD asset expected to drive growth “into the next decade.”
And in obesity, Pfizer’s win in the Metsera battle (up to $10B) is a loud signal that the GLP-1 land grab is still in “pay-anything-for-derisked-shots” mode.
In metabolic/liver disease, Roche’s move for 89bio (up to $3.5B) shows the appetite isn’t confined to obesity alone — it’s spreading to adjacent cardiometabolic blockbusters.
Here’s the hedge-fund-grade insight: this M&A cycle is increasingly “asset-led,” not “company-led.” Big Pharma doesn’t need to buy your whole story — it needs to buy one thing that can plausibly become a $1B–$5B product, with clean endpoints, scalable manufacturing, and a reimbursement story that won’t get kneecapped. That creates a very specific hunting ground: mid-cap and late clinical-stage biotechs where (1) the lead program is de-risked enough to underwrite, (2) the valuation still leaves room for a premium, and (3) the acquirer can immediately plug it into an existing commercial engine.
The takeover playbook: what actually gets bought (and what doesn’t)
If you want a “next takeout” watchlist that isn’t just throwing darts, screen for these six traits:
Derisking > novelty
Big Pharma pays for human data (Phase 2b/3 signals, validated endpoints), not PowerPoint mechanisms.Commercial adjacency
Same prescribers, same call points, same payer playbook = faster integration.Manufacturing simplicity wins
Orals and injectable peptides with known manufacturing paths generally beat bespoke one-off complexity (unless the clinical effect is absurdly differentiated).Clear differentiation
“Me-too with slightly better convenience” only clears if the market is gigantic (obesity is the exception).Strategic urgency
Companies staring at looming exclusivity loss (or concentration risk) pay up faster.Clean capital structure
A messy cap table, stacked converts, or near-term financing cliffs can scare strategic bidders — or force a “lowball.”
Winners and losers from here (the M&A regime effects)
Winners
De-risked clinical-stage biotechs in obesity/cardiometabolic, oncology, immunology, rare disease — especially those with one lead asset that can be “plug-and-play.”
Quality platforms with multiple shots (RNAi, gene editing, targeted protein degradation) when there’s a lead program with human signal.
Event-driven hedge funds and specialist PMs who can underwrite trial designs and probability-weight data.
Losers
“Story stocks” with no near-term clinical catalysts that have only survived on easy financing windows.
Over-owned “takeout narrative” names where the premium is already priced as if the deal is done.
Anything with a binary readout + no cash runway (M&A does not reliably show up to rescue weak balance sheets).
The Takeover Target Watchlist
Not “these will be acquired,” but these are the kinds of names I’d keep on a real desk watchlist because they map to where Big Pharma is already paying premiums: obesity/cardiometabolic, oncology, immunology, rare disease/genetic medicines.
Bucket 1: Obesity & cardiometabolic “arms race” targets
These are the most crowded but also where the TAM is so massive that strategic logic stays intact.
Structure Therapeutics (GPCR) — Oral obesity/GLP-1 pressure point. If big players want “second source / differentiated pill,” they shop here.
Viking Therapeutics (VKTX) — A classic “if the next dataset hits, this becomes too strategic to ignore” obesity/cardiometabolic setup.
Altimmune (ALT) — High torque cardiometabolic/weight-loss adjacency. This bucket is where the option value stays high.
Scholar Rock (SRRK) — The “muscle-sparing” angle is the next battleground in obesity (combo regimens). If that thesis proves out, these kinds of assets become chess pieces.
Who could buy (examples): LLY/NVO (defensive), PFE/AMGN/GSK/SNY/ROG (offense), plus any pharma with a metabolic gap.
Bucket 2: MASH/NASH and liver disease — the next obesity-adjacent land grab
The 89bio takeout is the tell: liver/metabolic is back on the menu.
Madrigal (MDGL) — If the market believes MASH is real and scalable, MDGL-style assets become “strategic scarcity.”
Akero (AKRO) — A frequent “strategic review” style name in the MASH orbit.
Terns Pharmaceuticals (TERN) — Another MASH-adjacent name where “one clean readout” can trigger strategic interest.
Who could buy: ROG/NVS/PFE/LLY/NVO/MRK (depending on pipeline holes).
Bucket 3: Oncology — “Keytruda cliff” behavior means sustained appetite
When oncology leaders need the next wave, they buy credible differentiation: ADCs, targeted therapies, IO combos, radiopharma, and platform-enabled pipelines.
Revolution Medicines (RVMD) — RAS pathway is strategic; if winners emerge, they don’t stay independent forever.
Summit Therapeutics (SMMT) — If the clinical story stays durable, IO assets often become “must-have or must-neutralize.”
Arvinas (ARVN) — Protein degradation remains a platform category where a single standout program can pull forward M&A interest.
Who could buy: MRK, AZN, ROG, BMY, NVS, PFE.
Bucket 4: Genetic medicines (RNAi / editing) — “platform with proof” gets paid
Big Pharma often prefers partnership → option → acquisition here, but full takeouts happen when a lead program is clear.
Arrowhead (ARWR) — RNAi platform logic; if a lead program becomes a true product, it’s a strategic magnet.
Intellia (NTLA) / Beam (BEAM) — Gene editing is still volatile, but strategic value spikes if durable efficacy + safety converge.
Who could buy: NVS, ROG, SNY, BMY, PFE (depending on risk appetite and existing partnerships).
Bucket 5: “Off-consensus” asymmetric shots (high upside, higher uncertainty)
These are not “probable takeouts,” but high-asymmetry names where one dataset can force a strategic response.
WAVE Life Sciences (WVE) — Novel biology + the market’s growing obsession with quality-of-weight-loss outcomes (fat vs lean mass).
Praxis Precision Medicines (PRAX) — CNS is hard; but when a CNS signal is real, big pharma notices.
Celcuity (CELC) — Oncology data momentum can create “we can’t let a competitor own that” situations.
Takeaways
Don’t chase the entire biotech index — build a “takeout basket.”
The edge is idiosyncratic: own names where a strategic buyer can underwrite the asset with human data and commercial adjacency.Follow the deal tape, not the headlines.
Pfizer paying up for Metsera tells you obesity competition is still escalating. Roche paying for 89bio tells you cardiometabolic adjacency (like MASH) is back. Merck paying $10B for Verona shows “non-obesity” therapeutic areas can still command mega premiums if the asset is commercial and durable.Expect more “option-to-buy” structures and partnerships.
In frothy categories, acquirers increasingly prefer staged risk: upfront + milestones, or minority stakes with embedded purchase options.Big risk: the “takeout premium” becomes the valuation.
If a stock trades like a deal is guaranteed, the asymmetry flips: you’re long hope and short reality.
News vs. Noise: What’s Moving Markets Today
News vs. Noise: Powell Refills the Punch Bowl, Oracle Trips Over It
The news from yesterday isn’t “25 bps cut” – it’s that Powell basically chose liquidity over credibility and the market still sold off because one key AI bellwether just reminded everyone that money isn’t free anymore.
On the Fed side, ignore the “hawkish cut” chatter that was popular going in. What actually happened:
25 bps cut with Core PCE ~2.8% / Core CPI ~3% – that’s cut #3 in this cycle while inflation is still above target.
Only 2 dissents, far fewer than the pre‑meeting chatter suggested. Translation: even the supposed hawks mostly went along.
And the big one: the Fed re‑started balance sheet expansion via “Reserve Management Purchases” – $40B/month in T‑bills for now, with “elevated” purchases for a few months. Call it whatever you want, it’s still more reserves and a fatter balance sheet.
Short term, that’s a green light for risk: Powell basically told you he’ll err on the side of protecting growth and jobs, not squeezing the last 50 bps of inflation out of the system. That’s why small caps, cyclicals, and “real economy” names ripped on the decision – the market hears “Goldilocks + Fed put.”
But the bond market is sending a louder message underneath:
10Y yields only dipped a few bps, not a classic “Fed cut → duration moonshot” move.
Term premium and supply/fiscal worries are still there, and traders have already started pricing a shallower path of cuts in 2026 than they were just a week ago.
Net: Powell is making money easier at the front end, but the long end isn’t playing along. That’s a different regime than 2010–2021. Multiples don’t get a free pass; cash flows and balance sheets matter again.
Now layer in Oracle, and you see why the market’s red this morning.
Oracle did everything the story crowd wanted:
RPO (future contracted revenue) blew past expectations – $523B vs ~$502B, +438% YoY.
New AI contracts from META and NVDA, not just OpenAI – that helps the “diversification” narrative.
Cloud and AI optics looked fine; guidance on cloud growth was solid.
And the stock still dumped ~11–12% after hours.
Why? Because the financing math is what matters now:
Capex was $12B vs ~$8.4B expected.
FY26 capex guide got raised by another $15B to ~$50B.
Free cash flow is still deeply negative; the business is now a levered AI infra build‑out machine.
Management leaned hard on “we have multiple funding options” and “we’re committed to investment‑grade,” which is exactly what you say when everyone’s staring at your CDS blowing out and your debt stack.
So the market just got two conflicting signals in 24 hours:
From the Fed: “We’ll keep the punch bowl out. Slower cuts, but more reserves. We’re not going Volcker.”
From Oracle: “Even with real AI demand, this capex wave can hurt you if you don’t have a hyperscaler‑grade balance sheet.”
That’s why the index reaction feels weird: macro said “risk on,” but micro said “AI capex tourists, please step aside.”
Takeaways for Investors
1. Don’t confuse a dovish Fed with a free pass on leverage.
Powell just made it clear he’ll lean toward growth. But with long yields sticky and term premium elevated, the market will reward self‑funders and punish anyone whose business model is “borrow big, pray later.” Oracle just got marked to that new reality.
2. Oracle is now the live stress‑test for the entire AI infra debt cycle.
If ORCL can’t convince the market it can fund $50B+ in capex and keep its IG rating safe, it tightens the screws for:
Heavily levered AI data‑center builders
“Neocloud” operators reliant on constant refinancing
Complex private‑credit structures backing AI capex (think META/Blue Owl‑style deals)
3. Watch what bonds do after the cut, not into it.
If the Fed is easing and 10s/30s refuse to rally, you’re in a world where:
Term premium, deficits, and supply are in the driver’s seat
Rate‑sensitive, long-duration “story” names are on a shorter leash
Real cash flows and balance‑sheet discipline are the new multiple driver, even in AI
4. In AI, sort your exposure into two buckets:
Safer side (relative):
Hyperscalers with fortress balance sheets and internal capex flexibility: MSFT, GOOGL, AMZN
“Toll collectors” with strong backlogs and moderate leverage: power/cooling/grid names, networking, foundry.
Danger zone:
Levered AI infra plays whose equity story = “permanent shortage + cheap funding forever”
Single‑counterparty, single‑project names riding one mega‑AI customer or one off‑balance‑sheet JV
5. Big picture: the Fed just told you liquidity will be there – but Oracle just showed you it won’t be free.
If you want to stay long AI, tilt toward the players who sell the shovels and can fund themselves in a world where the front end cuts, the back end sulks, and the credit market has started doing actual risk pricing again.
A Stock I’m Watching
Today’s stock is Braze (BRZE)…..
Braze (BRZE) is on my “watch” list because it’s one of the cleanest ways to play the next phase of AI in software: not “who has the best model,” but “who owns the workflow where AI actually drives measurable revenue.” The market keeps trying to frame BRZE as an “AI-disrupted marketing tool,” but that misses what the product really is: a multi-channel orchestration layer (email, SMS, WhatsApp, in-app, etc.) that’s deeply configurable, tightly integrated, and hard to rip out once it’s running real customer journeys at scale. The latest quarter reinforced that: another beat-and-raise, organic growth re-accelerating (~22%), early signs of NRR stabilizing, and the strongest new customer adds in three years—while the stock still trades at a depressed ~3–4x revenue, i.e., priced like a structurally challenged app. If management proves that AI is an accelerant (Decisioning Studio + BrazeAI) rather than a replacement, that “multiple mismatch” is where the upside lives—especially as they keep taking share from the legacy marketing clouds (CRM/ADBE/ORCL) that are heavier, slower, and less purpose-built for real-time engagement.
How Else I Can Help You Beat Wall Street at Its Own Game
Inside H.E.A.T. is our monthly webinar series, sign up for this month’s webinar below….
Why Covered Call ETFs Suck-And What To Do Instead
Thursday January 15, 2-3PM EST |
Covered call ETFs are everywhere — and everyone thinks they’ve found a “safe” way to collect yield in a sideways market. |
The truth? |
They cap your upside, mislead investors with “yield” that’s really your own money coming back, and often trail just owning the stock by a mile. |
Join me for a brutally honest breakdown of how these funds actually work — and what you should be doing instead. |
What You’ll Learn:
🔥 Why “high yield” covered call ETFs are often just returning your own capital |
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