NXP Qualcomm Biotech Rally Dollar Reversal

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Markets

Equities had been posting modest gains until the end of the day saw a mild sell-off across the board.
^SPX Chart

^SPX data by YCharts

Biotech continued to lead the market higher once again, with the IBB and XBI both up over one percent.
^SPX Chart

^SPX data by YCharts

Why The Biotech Jump?

The markets seem to finally realize any changes to drug prices will come through forms of deregulation and not price control. No surprise here. Like him or not, President Trump is a free market capitalist. Price controls always seemed like the least likely scenario to us.

Action within Biotechs was more mixed than yesterday’s one-way up direction.

Biotech Performers

Rates

The yield on Treasuries remains in its recent downdraft.
^TNX Chart

^TNX data by YCharts

Dollar

It is beginning to look like the Dollar may be finding a bottom, with support around the 97 level. On the far right of the chart, you can see the makings of a reverse head and shoulder, suggesting we could see strengthening in the Dollar over the next several weeks.
^DXY Chart

^DXY data by YCharts

NXP/Qualcomm

Why Qualcomm May Have to Pay $45 Billion for NXP

In the Qualcomm/NXP article, I drew a very strong argument for why Qualcomm may have to increase its bid for NXP. Valuations for the semiconductor sector (SOXX) have strengthened significantly over the past year, as the global economy has been picking up. Qualcomm has been running continuous tender offers over the past several months with each period drawing fewer shares than the previous.
AVGO PE Ratio (Forward 1y) Chart

AVGO PE Ratio (Forward 1y) data by YCharts

NXP Tender Periods

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Michael Kramer and the clients of Mott Capital Management LLC own shares of NXPI and SWKS.

Michael Kramer is the Founder and Portfolio Manager of Mott Capital Management LLC, a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.