Thursday, November 18, 2021

The rise of electric and autonomous vehicles; How 'TaaS' will change your life; I'm skeptical of EV stocks; Articles about Cassava Sciences and Activision Blizzard; Drug Overdose Deaths Hit Record High in U.S.; Dopesick

By Whitney Tilson

1) Nobody has been more bullish on the rise of electric vehicles ("EVs") and autonomous vehicles ("AVs") than I've been. On February 5 of last year, we released an in-depth video, which you can watch here (or read the transcript here), exploring these two technologies and how they will come together to produce "Transportation as a Service" ("TaaS"). Here's the key excerpt:

How "TaaS" will change your life

The technology I want to tell you about today is known in Silicon Valley and Manhattan as "TaaS," and if you've never heard of it, you soon will!

TaaS stands for "Transportation as a Service."

And while it might not sound like a very high-tech name, it's possible only because of the convergence of dozens of new incredible technologies, including two big new technologies in particular. I believe it could completely transform our daily lives.

Just for starters...

  • It will dramatically change the value of homes and real estate all over the country.
  • It will eventually put an estimated $5,600 back into the hands of 93% of U.S. families every year.
  • It will dramatically change the value of your car. For most people, this is a big deal because cars are most people's second-biggest purchase (after housing).
  • TaaS will also likely result in the collapse of oil prices.
  • It will radically change the tax structure of almost every city and small town in America. That's because estimates show that Chicago, for example, will lose at least $250 million in revenue because of TaaS. Los Angeles will lose more than $140 million. New York will lose a half-billion dollars... every single year!
  • TaaS will also radically change the insurance industry and the health care industry, saving millions of lives. In fact, at the end of the day, TaaS might be the biggest medical innovation in decades, even though it has nothing to do with pills or new equipment.

Anyone who took advantage of our $49 offer (which is still open if you click here) received, among other things, three research reports:

  • The No. 1 Way to Profit on the Electric Vehicle Boom
  • The Three Critical Driverless Car Technologies You Must Own Today
  • The TaaS Speculation – How to Quadruple Your Money in the Next Few Years

In these reports, we recommended five stocks. Since then, one is flat, two have doubled, and one has tripled. The best performer is up a staggering 364% – an average gain of 152% versus 40% for the S&P 500 Index. This year, these five stocks are up an average of 59% versus 25% for the S&P 500.

Again, you can instantly access these reports and also get a year of our flagship newsletter, Empire Stock Investor, for only $49 by clicking here.

2) We continue to recommend all five stocks. But I want to highlight that none of these recommendations are EV companies. We were skeptical then of both the valuations and our ability to pick the winners, so we instead focused on the companies providing the various technologies underlying EVs and AVs – the classic picks-and-shovels approach.

We're quite satisfied with the performance of our recommendations. While we missed the Tesla (TSLA) moonshot, we also steered clear of train wrecks that I've written about extensively, such as Workhorse (WKHS), Lordstown Motors (RIDE), and Nikola (NKLA), all of which have crashed around 80% to 85% from their peaks.

While I remain bullish on the rise of EVs – they are a vastly superior product to regular gas-powered cars and, as such, I believe they'll soon dominate new car sales around the world – there isn't a single EV stock I like right now.

In fact, there are two I would consider shorting if I were still in that business: Rivian Automotive (RIVN) and Lucid (LCID). These are both promising companies, but the former has yet to sell a single vehicle, and the latter just started delivering sedans in a 520-car limited edition last month – yet they are valued at around $113 billion and $75 billion, respectively.

For comparison, Ford Motor (F), which sold 4.2 million vehicles last year, has a market cap of roughly $80 billion...

3) Kudos to the Wall Street Journal for two outstanding pieces of investigative journalism yesterday. First, there was this story on a stock I've been writing about quite a bit recently, biotech firm Cassava Sciences (SAVA), which crashed 24% yesterday: SEC Investigating Cassava Sciences, Developer of Experimental Alzheimer's Drug. Excerpt:

The Securities and Exchange Commission is investigating claims that Cassava Sciences, the sixth-best performing U.S. stock this year, manipulated research results of its experimental Alzheimer's drug, according to people familiar with the matter.

Cassava disclosed Monday in a securities filing that it is cooperating with government investigations without naming any agency. Cassava said an investigation isn't a sign that wrongdoing occurred.

An SEC spokeswoman declined to comment.

The National Institutes of Health, which awarded $20 million in grants to Cassava and its academic collaborators since 2015 for drug development, is also examining the claims, according to the company's chief executive officer.

4) And this expose of the CEO of Activision Blizzard (ATVI) was on the front page: Activision CEO Bobby Kotick Knew for Years About Sexual-Misconduct Allegations at Videogame Giant. Excerpt:

Activision has been thrown into turmoil in recent months by multiple regulatory investigations into alleged sexual assaults and mistreatment of female employees dating back years. Mr. Kotick has told directors and other executives he wasn't aware of many of the allegations of misconduct, and he has played down others, according to people familiar with the matter and internal documents.

Those documents, which include memos, e-mails and regulatory requests, and interviews with former employees and others familiar with the company, however, cast Mr. Kotick's response in a different light. They show that he knew about allegations of employee misconduct in many parts of the company. He didn't inform the board of directors about everything he knew, the interviews and documents show, even after regulators began investigating the incidents in 2018. Some departing employees who were accused of misconduct were praised on the way out, while their co-workers were asked to remain silent about the matters.

Mr. Kotick has been subpoenaed in a Securities and Exchange Commission investigation into how the company handled reports of misconduct and disclosed them to the public, The Wall Street Journal reported in September. What Mr. Kotick knew about the alleged incidents and what he told other employees, the board of directors and investors, is part of that probe.

It's hard to see how Kotick survives this scandal, especially now that ATVI's partners are speaking up: Sony's PlayStation and Others Put Pressure on Activision Blizzard.

5) I've written extensively about the tragic opioid crisis, which was largely created by Purdue Pharma and the Sackler family, which, in one of the great miscarriages of justice, was allowed to walk away with billions of dollars in blood money. I won't repeat myself, but it's on my mind today for two reasons: first, this cover story in both the New York Times and Wall Street Journal: Drug Overdose Deaths Hit Record High in U.S. Excerpt:

The U.S. recorded its highest number of drug-overdose deaths in a 12-month period, surpassing 100,000 for the first time in the shadow of the coronavirus pandemic, according to the Centers for Disease Control and Prevention.

There were an estimated 100,306 drug deaths in the 12 months running through April, the latest CDC data show. This marks a nearly 29% rise from the deaths recorded in the same period a year earlier, indicating the U.S. is heading for another full-year record after drug deaths soared during the Covid-19 pandemic.

"It's telling us that 2021 looks like it will be worse than 2020," said Robert Anderson, chief of the mortality statistics branch at the CDC's National Center for Health Statistics.

Opioid-related deaths, mainly fueled by bootleg versions of the potent drug fentanyl, accounted for about three-quarters of the deaths through April, according to the CDC, which counts provisional drug deaths in yearlong blocks. These records take months to compile because drug overdoses typically require local death investigations and toxicology tests.

Fentanyl has for years been a major catalyst in an intensifying U.S. overdose crisis. The nation was reporting fewer than 50,000 fatal overdoses as recently as 2014. In 2020, the number surged to a record of about 93,330.

The pandemic intensified opioid problems in many ways, from increasing isolation among people trying to maintain their sobriety to complicating treatment, according to advocates for drug users and those in recovery. The pandemic has also been a major draw on resources and attention for public health authorities, who are still trying to manage Covid-19.

Also, my wife and I are halfway through watching the Hulu series, Dopesick, which is very powerful – highly recommended. You can watch the trailer here.

Best regards,

Whitney

P.S. I welcome your feedback at [email protected].

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Empire Financial Research

Whitney Tilson

Empire Financial Research founder and CEO Whitney Tilson is the editor of the Empire Investment Report, a monthly investment advisory that focuses on cheap, high-quality stock ideas.

Whitney graduated with honors from Harvard University and Harvard Business School, where he earned an MBA and was named a Baker Scholar. Whitney spent nearly 20 years on Wall Street, during which time he founded and ran Kase Capital Management, growing assets under management from $1 million at inception to a peak of $200 million.

Once dubbed "The Prophet" by CNBC, Whitney predicted the dot-com crash, the housing bust, the 2009 stock bottom, and more. Now, he's sharing his secrets and strategies with followers of his latest endeavor, Empire Financial Research.

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