The Oxford Communiqué September 2020
The Oxford Communiqué September 2020
The Oxford Communiqué September 2020
in the emerging markets of Asia, Eastern Europe These countries represent 59% of total global GDP,
and Latin America. up from less than half a decade ago and just 23%
From January 2010 through December 2019 – that two decades ago.
period of blockbuster U.S. equity returns – the
MSCI Emerging Markets Latin America Index Driving Global Growth
returned -29.4%. As with the U.S., it was a rare Investors in developed markets may not realize
down decade. it, but emerging markets today are the world’s
And just as U.S. stocks were ultra-cheap in 2009, so primary drivers of both global growth and wealth
are emerging market stocks today. accumulation.
Here’s a chart that shows the performance of They comprise the dominant share of the world’s
emerging markets versus the U.S. population and natural resources and the largest
reservoir of future consumers.
Emerging Markets vs. U.S. Most Americans and Europeans consider these poor,
backward countries.
■ MSCI Emerging Markets Index ■ S&P 500
Total gains And most of them are indeed less affluent and less
250% technologically advanced than Western nations.
200%
But they are rapidly catching up.
150%
Most developing countries have evolved from
100%
authoritarian governments to democracies and from
50% state-controlled economies to capitalist ones.
0%
Global economic inequality is falling, not rising.
2011 2013 2015 2017 2019
And the answer is a resounding yes. That’s the equivalent of creating a new New York
City every two months.
Let me start by making the macro case...
The people in these nations have made major strides
Emerging markets make up more than 160 – or 80% in education levels, infant mortality, life expectancy
– of the approximately 200 nations in the world. and other key metrics.
These countries contain 77% of the world’s And they want everything that we already take
landmass and 85% of its population. for granted in the West: homes, cars, appliances,
computers, smartphones, credit cards, health
China and India alone have over 2.7 billion insurance, financial services, designer clothing, etc.
citizens, or more than 35% of the planet’s
In short, the biggest economic development of the
population of 7.8 billion.
next few decades will be the emergence of a new
And here’s something that may surprise you. “world middle class.”
memo from the chief 3
In the months and years ahead, there will be The Emerging Markets High Dividend Fund
fortunes made meeting the wants and needs of these covers 17 different emerging markets and gives
6.6 billion individuals. broad multicap exposure: large caps, midcaps and
Yet when I talk to most small caps.
Americans about how The fund has a strong
much exposure they have
to emerging markets
“I’ve recently uncovered a value tilt.
in their portfolios, vehicle that gives you broad The stocks tend to be
the typical answer is
diversification among the most conservative, defensive
somewhere between zero companies with low sales
and 5%. undervalued opportunities in and earnings ratios and
That’s far too little. this market.” high dividends.
The firm specializes in both active and passive It’s also why I view this emerging markets ETF as the
investment strategies and constructs portfolios that world’s most undervalued investment opportunity.
are not market cap weighted.
Action to Take: Buy WisdomTree Emerging
(Market cap weighting is why the top 10 stocks in Markets High Dividend Fund (NYSE: DEM) at
the S&P 500 make up approximately a quarter of market. And use our customary 25% trailing stop to
the index.) protect your principal and your profits. n
b u i l d i n g w e a lt h 4
The undisputed victor in the contest was the school classroom in Pittsburgh. Our teachers were
Good Judgment Project, led by none other than preparing us for the impending Armageddon.
Tetlock himself.
Ehrlich was a quintessential hedgehog. He made
He identified the following characteristics of good dozens of appearances on Johnny Carson’s Tonight
predictors... Show. (You can still watch some of them on
YouTube.)
• Philosophic outlook: cautious, humble and
nondeterministic Of course, the population bomb never exploded.
But that didn’t convince Ehrlich to change his mind,
• Thinking style: open-minded, intelligent, as the story below illustrates.
curious, reflective and numerate
Ehrlich made a bet with business professor Julian
• Forecasting style: pragmatic, analytical, Simon that five commodities would increase in
probabilistic, thoughtful updaters and the 1980s because of massive starvation-induced
intuitive psychologist shortages.
• Work ethic: growth mindset and grit. Ehrlich lost the bet. Yet he defiantly compared
Tetlock found that only about 2% of experts were Simon to a man who jumps from the Empire State
“superforecasters.” Members of this rarefied group Building and, as he passes onlookers on the 50th
were 30% more accurate than intelligence analysts floor, announces, “All’s well so far.”
with access to classified information. Hedgehogs are never wrong. They are just early.
What does this tell us about hedgehogs and foxes?
Investing With Hedgehogs:
Tetlock found that hedgehogs’ predictions were
no better than random ones. Foxes’ intellectual Caveat Emptor
flexibility made them better predictors overall. So what does all this talk of hedgehogs and foxes
have to do with investing?
You’ll never find foxes making big and bold
headline-grabbing predictions like hedgehogs do. It turns out the investment world is chock-full
of hedgehogs.
Tetlock found “a perversely inverse relationship
between... good judgment... and the qualities that They include gold bugs, “China miracle” types and
the media most prizes in pundits.” the techno-optimists of Silicon Valley.
As a TV producer at CNBC once told me, They are “doomsters” (Jim Rogers, Peter Schiff and
“[Hedgehogs] simply make for good TV.” Nouriel Roubini), “boomsters” (Elon Musk and
Peter Diamandis) or both (Harry Dent).
My Favorite Hedgehog Story Much like Ehrlich, these hedgehogs have gotten a
Hedgehogs’ Achilles’ heel is their hubris and lot of things wrong.
closed-mindedness. Tetlock cites the example of
Gold did not go to $5,000 an ounce in 2008.
Stanford professor Paul Ehrlich, author of The
Population Bomb. Investors made a lot more money investing in the
U.S. than they did investing in the China miracle.
Ehrlich famously predicted hundreds of millions
of people would die of starvation in the 1970s. I The global financial crisis of 2008 did not morph
recall seeing copies of Ehrlich’s book in my grade into a second Great Depression.
continued on Page 7
b e yo n d w e a lt h 6
According to informed sources (braver than me), People need insects to survive, but insects do not
beetles taste like apples, wasps like pine nuts and need us. If all humankind were to disappear
worms (not really insects) like fried bacon. tomorrow, it is unlikely that a single insect
Advocates point out that bugs are high in protein species would go extinct, except three forms of
and other nutrients. human body and head lice... But if insects were
to vanish, the terrestrial environment would
For instance, a 100-gram portion of grasshopper soon collapse into chaos.
meat contains 20.6 grams of protein, just 7 grams
less than an equivalent portion of beef. He points out that a majority of flowering plants,
deprived of their pollinators, would cease to
In addition, insect farming requires less water, reproduce. Birds, reptiles and mammals, denied the
less feed and less land per calorie than traditional foliage, fruits and insect prey on which they feed,
livestock farming. It also produces much lower would follow the plants into oblivion.
greenhouse gas emissions.
The soil would remain largely unturned because
The ecological services that insects provide are
simply incalculable. insects, not earthworms as generally supposed, are
the principal renewers of the soil. A decline in soil
Ladybugs, mantids and other predatory insects eat quality would herald the end of wind-pollinated
aphids and other insects harmful to plants. grasses and eventually the trees. Before long, human
Termites – while unwelcome behind your walls populations would experience widespread starvation
– decompose the wood in forests and help bring and soon disappear.
nutrients back to the soil.
Insects’ small stature may prevent them from
Many species of flowering plants owe their very being recognized as masters of the planet. But
existence to insect pollinators. their importance and durability are beyond
Honeybees, in particular, are responsible for 80% dispute. Insects witnessed the rise and fall of the
of the pollination in the United States, affecting dinosaurs. They have survived at least four major
some $15 billion in crops each year, including cataclysms that resulted in planetwide extinctions.
almonds, apples, cherries, blueberries, cucumbers, They continue to thrive despite mankind’s best
squash and melons. efforts at eradication. And they will very likely out-
survive us.
We Need Them, They
Don’t Need Us Ours is a symbiotic relationship, but a skewed
one. We need the insects. They don’t need us.
In The Creation: An Appeal to Save Life on Earth,
Pulitzer Prize winner and Harvard biologist E.O. That leads to an odd and humbling thought: Just
Wilson writes... who is really bugging whom? n
This means newly acquired Aetna will save tens of No one had any idea what he was talking about.
millions of dollars annually that it won’t have to
So he set up a laboratory in his basement to explore
shell out for routine doctor and hospital visits.
this potential treatment for cancerous tumors.
CVS also allows customers to refill prescriptions
What Palti discovered is that alternating electric fields,
through an app and pick them up at any store
when applied at specific frequencies, can not only
location. And it delivers medications directly to
stop cancer cells from dividing but kill them outright.
patients’ homes with an electronic prescription from
their doctor. He called this innovative cancer treatment Tumor
portfolio review 9
Treating Fields. And he used the discovery to found Saving Lives and
Novocure in 2000.
Generating Profits
The firm is now an international oncology leader NeoGenomics (Nasdaq: NEO), another member
with nearly 600 employees, operations in the U.S., of our Ten-Baggers of Tomorrow Portfolio, also
Europe and Asia, and $380 million in annual sales. appears undervalued.
In 2011, the company launched Optune – its Tumor NeoGenomics is the world’s leading oncology
Treating Fields delivery system – for glioblastoma, the testing company for doctors, pathologists and
most common primary brain cancer and one of the hospitals, serving more than a half-million patients
most difficult cancer types to treat. each year.
The FDA approved the device in 2015, and Cancer is primarily a disease of old age, so our
Novocure received subsequent approvals for next- increasing longevity is driving cancer incidence.
generation upgrades in 2016 and 2019.
The proliferation and complexity of new therapies
Today it is sold in the U.S., Germany, Austria, are also driving sales, especially since follow-up
Switzerland, Sweden, Israel, China and Japan. testing increases survival rates. And the burgeoning
oncology drug pipelines will increase future testing
Optune uses low-intensity electrical fields to treat
as well.
both glioblastoma and mesothelioma, a tumor of
the tissue that lines the heart, lungs, stomach and With more than 10,000 baby boomers turning 65
other organs. every day, future growth here is practically assured.
However, studies are underway with other brain NeoGenomics has “outfocused” its larger rivals by
cancers, as well as pancreatic, ovarian, liver and concentrating entirely on cancer testing rather than
lung cancers, with key results due over the next diversifying more broadly. Precision medicine is now
few months. a critical component in controlling the disease.
Novocure customizes its technology to target NeoGenomics’ comprehensive laboratory system
each cancer type. And its devices work in patients gives it the ability to interrogate a blood-based
undergoing other forms of treatment, including cancer or solid tumor by as many means as are
radiation, chemotherapy and immunotherapy. necessary to reveal biomarkers that expose the
disease’s vulnerability to different therapies.
Each of these other three methods has advantages
and disadvantages. But a combined approach And the company’s rapid test development cycle
attacks the tumors on multiple fronts – and boosts gives doctors and patients the answers they need as
patients’ responses. quickly as possible.
Why is that important? Because you want to Looking ahead, I estimate that earnings per share
hit the deadliest cancers with everything in will rise from breakeven this year to approximately
your arsenal. $0.45 in 2021.
Novocure is just turning the corner on profitability. According to the National Cancer Institute, more
Sales are growing at a 39% annual rate. And I than 1.7 million new cases of cancer are diagnosed
estimate that earnings will soar from $0.18 a share in this nation each year. But the good news is the
this year to nearly a dollar a share in 2021. overall death rate from cancer is falling.
As doctors become better educated about the There are more than 15.5 million cancer survivors
effectiveness of the Optune system, sales and profits in the U.S. And that number is expected to rise to
at Novocure will soar. And so should the stock. 20.3 million by 2026.
portfolio review 10
NeoGenomics is playing a key role in this. It is the Meanwhile, it keeps signing new contracts
only pure-play, publicly traded oncology diagnostics every week. And this fall, Apple will roll out a new
lab in the country. And its shares are well worth iPhone with 5G capabilities. That should be a
buying at current levels. particularly hot seller.
Foxconn’s dominance as the world’s largest contract
Foxconn Puts On an manufacturer is not likely to be challenged.
Impressive Rally Its patents form a technological “moat” around the
Everyone marveled at Apple’s blowout quarter a few company’s core business and profit margins while
weeks ago. That is good news indeed for our special also allowing it to explore new opportunities. The
situation stock, Hon Hai Precision Industry stock remains a superb long-term holding.
(OTC: HNHPF), better known as Foxconn
Technology Group. Moving Livongo to a “Hold”
Based in Taiwan, Foxconn is the world’s largest Within days of my Livongo Health (Nasdaq: LVGO)
contract electronics manufacturer – and third-largest recommendation in the last Communiqué, Teladoc
technology firm by revenue. Health (NYSE: TDOC) agreed to buy the company
in a cash and stock deal valued at $18.5 billion.
Its customers span many cutting-edge and highly
profitable sectors – computers, smartphones, Under the terms, which have been approved by both
consumer electronics, retail, lodging, automobiles, boards, Livongo Health shareholders will receive
medicine, travel, banking and e-commerce. 0.592 shares of Teladoc Health plus $11.33 in cash
for each share they hold.
Foxconn is the primary assembler of Apple’s
iPhones and iPads, and also manufactures the However, regulators may not approve the deal.
Amazon Kindle, Nintendo 3DS and Wii, Sony Shareholders may not either. And, obviously, the
PlayStation, Microsoft Xbox, and BlackBerry – to value of the final payout depends on what happens
to the price of Teladoc Health before the deal closes.
name just a few.
I’m inclined to wait and watch Livongo for a while,
Its client list reads like a Who’s Who of tech
as there are various scenarios that could play out.
industry heavyweights, including Amazon,
Microsoft, Intel, Google, Dell, Cisco, Nvidia, That’s why the stock is a “Hold” in our Oxford
Huawei, Xiaomi and Apple. Trading Portfolio for now. We don’t generally see
such a dramatic development within days of a
Apple is the firm’s biggest client, providing new recommendation. But in this case, it appears
approximately half of its annual revenue. entirely positive.
However, the firm is now gearing up for expanded
investment in three key areas: electric vehicles, Time to Sell Momo
robotics and smart medical devices. Finally, I suggest you sell Momo Inc. (Nasdaq:
MOMO) in our Ten-Baggers of Tomorrow Portfolio
Foxconn sees these as drivers of future profit as
at market.
these industries are expected to experience 20%
compounded annual growth over the next few years, Our strategy is based on the recommended
with total industry sales hitting $1.4 trillion by companies beating revenue estimates, and the firm
2025. Foxconn expects to capture 10% of this – or lagged in the most recent quarter. I will have a
$140 billion annually. replacement stock for you soon. n
THE OXFORD TRADING PORTFOLIO
An active and diversified portfolio of the market’s most compelling opportunities.
CVS Health (NYSE: CVS) Mar-20 $53.65 $65.71 Buy $52.97 24.3%
Genmab A/S (Nasdaq: GMAB) Mar-20 $20.41 $36.05 Buy $27.41 76.6%
Livongo Health (Nasdaq: LVGO) Aug-20 $113.17 $121.41 Hold $108.40 7.2%
Vertex Pharmaceuticals
May-20 $256.11 $268.73 Buy $227.33 4.9%
(Nasdaq: VRTX)
WisdomTree Emerging Markets
Sep-20 New $38.02 Buy 25% New
High Dividend Fund (NYSE: DEM)
ZTO Express (NYSE: ZTO) Mar-19 $18.77 $36.00 Buy $28.98 94.6%
Note: If a “Buy” recommendation pulls back to within 5% of our protective stop, we routinely move it to a “Hold.” If the stock resumes its
upward climb, we will move it back onto our “Buy” list.
TOTAL
COMPANY/SYMBOL REC. DATE REC. PRICE CURR. PRICE RATING
GAINS
Note: We do not use trailing stops in this portfolio. A sell recommendation will be triggered if a company misses its quarterly consensus
revenue estimate by 20% or more, or if we believe the company’s business prospects have worsened in some fundamental way.
* Official sell price.
THE OXFORD ALL-STAR PORTFOLIO
A diversified basket of funds and holding companies managed by some of the world’s top-performing money managers.
TOTAL
COMPANY/SYMBOL REC. DATE REC. PRICE CURR. PRICE RATING
GAINS
Berkshire Hathaway B Shares (NYSE: BRK-B) Jan-01 $44.58 $212.58 Buy 376.8%
Templeton Dragon Fund (NYSE: TDF) May-02 $9.20 $22.79 Buy 510.0%
Templeton Emerg. Mkts. Fund (NYSE: EMF) Jan-02 $8.80 $15.22 Buy 306.5%
Note: The All-Star managers make buy and sell decisions within these securities themselves. We do not use trailing stops here.
Vanguard Total Stock Mkt. Index (VTSAX) Apr-03 $19.59 $82.86 Buy 15% 391.8%
Vanguard Emerg. Mkt. Index (VEMAX) Apr-03 $9.53 $36.06 Buy 10% 396.7%
Vanguard Europ. Stock Index (VEUSX) Apr-03 $34.67 $66.89 Buy 10% 205.0%
Vanguard High-Yield Corp. Fund (VWEHX) Apr-03 $6.02 $5.86 Buy 10% 106.9%
Vanguard Inflation-Protected Securities
Apr-03 $12.09 $14.32 Buy 10% 78.6%
Fund (VIPSX)
Vanguard Pacific Stock Index (VPADX) Apr-03 $36.07 $82.06 Buy 10% 213.0%
Vanguard Short-Term Investment (VFSTX) Apr-03 $10.82 $11.00 Buy 10% 55.2%
VanEck Vectors Gold Miners ETF (GDX) Apr-03 $28.26 $42.39 Buy 5% 220.5%*
Note: The Gone Fishin’ strategy requires annual rebalancing and does not require the use of trailing stops.
* Gains include Vanguard Global Capital Cycles Fund (VGPMX), formerly the Precious Metals and Mining Fund, held from April 1, 2003, through
January 14, 2020.
Prices as of August 10, 2020 | Note: For the absolute latest updates on all of The Oxford Communiqué’s portfolios, visit www.oxfordclub.com.
The Oxford Club LLC provides its Members with unique opportunities to build and protect wealth globally
under all market conditions. We believe the advice presented to Members in our published resources and CEO & Executive Publisher Julia Guth Director of Copy Editing Anne Mathews
at our seminars is the best and most useful to global investors today. The recommendations and analysis Chief Investment Strategist Alexander Green Research Director Kristin Orman
presented are for the exclusive use of Members. Members should be aware that investment markets have Quantitative Strategist Nicholas Vardy Senior Graphic Designer Chelsea Centineo
inherent risks and there can be no guarantee of future profits. Likewise, past performance does not secure Executive Editorial Director John Atwood Graphic Designer Roshna Joshi
future results. Recommendations are subject to change at any time, so Members are encouraged to make
Senior Managing Editor Christina Grieves
regular use of our website, www.oxfordclub.com.
© 2020, The Oxford Club LLC I 105 W. Monument St., Baltimore, MD 21201 I 800.992.0205
Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the membership agreement and any reproduction, copying or redistribution (electronic or otherwise, including on the world wide web),
in whole or in part, is strictly prohibited without the express written permission of The Oxford Club LLC. Information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. You and your family are entitled
to review and act on any recommendations made in this document. The Oxford Club expressly forbids its writers from having a financial interest in any security they recommend to their readers. All Oxford Club employees and agents must wait 24 hours
after an internet publication and 72 hours after a publication is mailed before taking action on an initial recommendation. The Oxford Club does not act as an investment advisor, or advocate the purchase or sale of any security investment. Investments
recommended in this newsletter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.
Basic dues for subscribers to The Oxford Communiqué are $249 a year. The issue is published monthly by The Oxford Club LLC, 105 W. Monument Street, Baltimore, MD 21201. Non-U.S. dues are higher and vary from country to country.
Send address changes to The Oxford Communiqué, 105 W. Monument Street, Baltimore, MD 21201. For questions regarding the status of your membership, call Member Services at 443.353.4056. Our website is www.oxfordclub.com.