#290: A Secret AI Stock to Buy Right Now?

0:00Emmet:They've increased their 2028 revenue target to$2.2 billion, which would equate to 34 % annual growth. The drivers for that growth is breakthroughs with their smart platform technology, which, as I said, now predicts how patients will respond to cancer therapy.

0:24Emmet, how are we getting on? Good to see you, Mike. How are you this week? i'm good i'm good i feel like i'm in following a succession episode with this uh netflix crack it's it's really i'm pretty sure this was a storyline in the last season of succession am

0:40Emmet:i wrong i can't remember it fully no you're on the money this is the roy family played by oh what's his name again brian something but the brian cox brian cox brian cox is the kind of walt disney character overseeing this giant multimedia empire and of course there's a border in battle and you're absolutely right so what's the latest with netflix because i gave a piece on it was it last week two weeks ago no and in fairness two weeks ago we kind of didn't i didn't foresee this playing out as it did um but it is it's fascinating because it has all the elements to it it's pure corporate boardroom it's got the nepo babies it's got tech coming into legacy media and all the rest so i'm gonna all right let me get through it first um so basically what happened was Netflix was in a bidding war alongside Paramount Skydance, which is run by David Ellison, son of Larry Ellison, founder of Oracle, and then Comcast.

1:36Comcast we can forget about, I think, for the moment. But Netflix's bid was accepted on Friday. It was a cash and stock transaction valued at$27.75 a share with a total enterprise value of$82.7 billion, which includes assuming$10.7 billion of Warner Brothers debt. So that is kind of where we're standing. Netflix essentially won the bidding war. Now, what's important here as well is Netflix is also subject to a$5 billion breakup fee if the acquisition does not go ahead, which might come into play. So let's talk Netflix first, and then we'll move on to Paramount.

2:12Emmet:But by the way, Mike, just one small caveat. I think it depends on who does the breaking up. So if Netflix breaks it off with Warner Brothers, they owe them what was at$5.9 billion. Yeah. Yeah. And it's about half that if it's broken up in the opposite direction, which I think is the greatest threat at this moment. Absolutely. But then again, if Warner Brothers goes off with bags more money, you know, that could be a rounding error. Yes, exactly. We're going to start with the necklace bit and then we'll get into the kind of corporate intrigue bit at the end. And so, yeah, where do we go? Netflix, it's huge, huge news for kind of media, film, streaming, Hollywood, pretty much anything that's watched on something bigger than a phone.

2:55you know this is really really really impactful so from a just pure content perspective you know integrating media from warland brothers and hbo into netflix platform it's going to go a long long way to establishing netflix as beyond it probably is a must-have now already you know and that that will just take to the next level of just an absolute must-have for global households everywhere around the world and it also brings in a huge amount of opportunity and optionality when it comes to premiumization because Netflix has had this thing where their ad supported models and their cheaper versions have become really, really popular.

3:28And now if you're adding in HBO, if you're adding in like Warner Brothers, the studio, just the amount of IP there, maybe the company has the option, okay, what do we do if we keep them as separate services or, you know, the upper upper tier, the gold platinum version of the subscription, you know what I mean? So I think it is a really interesting thing and then on top of that and the most important thing here beyond the content it just takes a potential big name competitor out of the running paramount or i won't say comcast if comcast did win paramount did win the bid either company could have a potential you know you could have the potential and content to create a very strong alternative to netflix because netflix is absolutely dominant in the streaming world so in winning this bid they have kind of have cut off what could be their encroaching number two, say, in this industry.

4:21So as a business decision, it makes an awful lot of sense. Now, there are some concerns. An acquisition of this size for Netflix is unheard of. They've always preferred to build rather than buy. And we've seen a history of these major media conglomerates, major media mergers, say that three times fast, not doing well. like disney's purchase purchase a fox comcast purchases sky there's plenty of pitfalls here this differs a bit in that netflix is not buying any legacy media channels it doesn't have to manage that it's a content play and we'll put it right at the top of the hollywood food chain like undoubtedly um and it doesn't have to do like there is a small shift in strategy when it comes to theatrical releases but it won't take any major overhaul for netflix to do this so that's where i I see it in terms, in comparing to those two mergers in particular, I think it compares favorably.

5:16I don't think it has the same potential pitfalls of Disney and Fox, of Comcast and Sky. Now, here we get into the whole succession part of it. So basically, David Ellison, the children of Roy, in this instance, the Nepo babies, they've come in here from the top rope, basically, and they put out a hostile bid. So they've gone directly to the shareholders of Warner Brothers with their offer, which is$108.4 billion for the whole shebang. So that includes Discovery Global, which is the cable TV channels like CNN and TNT, which is important because in David Allison, Paramount Skylines' bid, they value that as$1 a share.

6:02So of the$30 a share they're offering, they value that as low as$1 a share compared to Netflix's offer, which has to take into account that that Discovery Global is going to be spun off as its own public company. In that bid, it offers it at$3 a share. So this is where it kind of becomes contentious. And this is where, say, if you're a Warner Brothers shareholder, you'll be looking at that and be like, oh, well, maybe there is a lot more money on the table that we're turning down. Now, more importantly, I think, to this whole thing is that from a regulatory perspective, this couldn't be more cozy with the trump administration we've mentioned larry ellison whose father is trump confidant big donor very involved um he's also got the backing of the saudi abu dhabi and qatari sovereign wealth funds and there's a little kicker as well so jared kushner trump's son-in-law is also involved with the financing of this deal so we're looking at okay did netflix offer a better deal maybe maybe not but david ellison is putting out there that we are way way way more likely to get approved regulatory regulatorily so he said and then there's some there's some credence this as well his quote is saying allow allowing the number one streaming service to combine with the number where three streaming service is anti-competitive.

7:26Now that's obviously a wolf whistle to shareholders. We've got the administration behind us here with this, but there is grounds there. So I don't know what's going to happen next. I imagine we're recording this late Tuesday. If this episode is coming out on Thursday, I'm sure there's going to be blockbuster news on Wednesday that could make all this obsolete. But if it doesn't, it leaves it in a really interesting position. I don't think that Netflix and Warner Brothers were going to leave that, you know, handshake, leave that agreement without considering this possibility. The fact that it is Paramount's guidance's bid that was rejected, you know, it's not an increased offer.

8:08I think that gives a credence as well. But it is interesting to see that David Ellison is kind of putting his finger on the scales, being like, look, you know, who's in the White House? Who's going to suffer if, you know, Netflix doesn't get this deal through? Who do you think has had a better chance of getting this deal through? So it's up in the air. It is interesting. Yeah. What are your thoughts as a Netflix shareholder here?

8:30Emmet:I was interested to see last night that the management team and Netflix said that, oh, we entirely expected this to happen and we're entirely confident we're going to win this particular bid. but it wasn't supported at least in the piece I read by a whole lot of data to understand why they expected it and why they indeed believed they're going to win especially when you're looking at that relationship I suppose is the softest word we can use there's an undeniable relationship between the financing of the deal from Ellison and the deal on the table Par from the fact that Alison and co have offered a sizable amount of cash more than Netflix, it is, as you said, power charged by Kushner.

9:18Emmet:So and then when you consider a relationship, it seems, I don't want to use any negative word, but it's all very much feels like it's in the bag. Do you know what I mean? So how do I feel as a shareholder? I have so much faith in the Netflix management team. Whenever I've doubted them, I've been proven wrong, thankfully. They're very strategic and perhaps they did see this coming and perhaps it's all part of a master plan. It was funny. I sent out a tweet yesterday saying, well, the share price fell when it was Netflix share price fell. I saw this. damned if you do damned if you don't yeah so the netflix share price fell after they were announced as the the winning bidder yeah for wonder brothers discovery then when uh donald trump said i don't think this is going to happen or it's going to get past the antitrust uh assessment uh the share price fell so like and then as i said on twitter pick aside people are we happy or are we unhappy When the Paramount deal came through, Paramount stock went up, Warner Brothers stock went up, Netflix stock went down again.

10:34Emmet:It is just unbelievable. So there you go. We've got a buying opportunity. Yeah. Yeah, it is interesting. It's on a bit of a knife edge. I don't think this public, this hostile bit towards shareholders should change anything, but they are the ones that make the decision. That's what it comes down to. And I think David Zaslav, who was the head of Warner Brothers, he really must have had his ducks in a row when he decided on Netflix. Because what they're saying is that they came out and they expected this. And so he has his board on site. He has enough shareholders on site, I think, to get this over the line.

11:10Or he wouldn't have announced it because it comes down to how much of a deal he can get for his shareholders. Now, some of it is down to, you know, their valuation versus our valuation when it comes to Discovery Global and CNN and TNT and all the cabled news channels and all the rest. So, yeah, it is up in the air. It kind of, if you look at the political motivations behind it, can get a bit murky as well, because, you know, CNN is very much a left leaning news channel, that big critic of Trump throughout its history, you know. what happens when Trump buddies take over that channel. And so that's beyond kind of what we're talking about here on a stock show.

11:52But it is interesting. And I'm sure loads is going to happen. This is the last we talk about it.

11:57Emmet:Yeah, you're right. I mean, the story is going to change, as you said, immeasurably in the next 48 hours. And this is going to be a stale podcast before it hits the first airways. But they did say, the Warner Brothers Discovery Management team in the last couple of weeks did say that it isn't just the check size that matters it's also the legacy so are they setting this business up to ultimately grow into something bigger or at least the brand and its assets now what price is that i mean honestly is is saying that worth turning your nose up at an additional 20 billion or whatever and i'm sure most shareholders would say no if they are being forced out but i wonder i'm just gonna there's a distinction to be made there and this is what i'm saying about the discovery global valuation is that netflix is only buying the studio and hbo it's not do you know what i mean that's where the extra 25 billion is now i don't think anyone is valuing discovery global that spin-off at 25 billion but it is important to make the distinction there because it's easy for the headlines when i saw the headline i was kind of like oh wow because they are buying more than netflix is buying so they obviously have the bigger number i think that's important as well yeah that's true no it's a very valid point yeah well we will see um funny at a hunch level if you park all the uh financial considerations and as a shareholder in netflix i'd love to see them win the deal because that that uh library of theirs is going to go from impressive to almost everything like it is truly something to behold when you look and read through the titles that uh warner brothers discovery hbo actually owns yeah there's no doubt you've interacted and love a lot of their media yeah my only concern and this goes beyond stock this is just as a person who likes going to the cinema i i would have maybe some doubts over their long-term plans of theatrical releases but that's that's a completely another kind of another conversation for another podcast but uh we're going to move on because we've got a lot to cover this episode you want to talk horizon really quickly.

14:05Yeah, and I'd like to remind our listeners, just as the sun is setting on 2025,

14:09Emmet:it's also setting on a ridiculous special offer for Horizon, the service that I run, which has now been re-rated to$3 ,000 a year, but can be subscribed to for a tiny fraction of that amount for a few more days. And why would you care, dear listeners? Well, in the year ahead, I'm going to pitch 12 stocks in a horizon one a month and keep buying into a handful of companies from all the pitches i've made that i believe have the greatest chance of hyper growth when a massive tailwind catches their sales uh one of which i'll be speaking about in this podcast i should add in a few moments i have 26 stocks in the horizon portfolio and some are there mike because uh i I have gained unique insights, as you know.

14:57Emmet:For example, an unheard of, battered up Canadian company I bought a couple of weeks ago. Actually, last week, it wasn't a couple of weeks ago, where I spoke with somebody very familiar with the business. Other companies, such as another one I bought in the same buy alert a few days ago, has many of the attributes I look for in companies that have gone on to grow 100 fold. and that stock I'm mentioning is the most purchased company in Horizons and my personal history. So I bought two stocks last week and they were bought for entirely different reasons. So if you email my colleague, our colleague Frank, before the 22nd of December, he'll send you a link to buy it and lock it in for that massively discounted price, which is a tiny fraction of where we are now, where we're going to bring it.

15:51Emmet:Plus, you'll get my three favorite Nexus stocks from Nexus 1, 2, and 3, which is something I'm working on now. So for the final enrollment on this price point, email frank at mywallstreet.com. That's frank at M-Y-W-A-L-L-S-T dot com. Okay, we're moving on to a very interesting industry, an industry that's been on absolute fire so far in 2025. So it is, I'm not sure really the exact terminology to give this because there is an awful lot that say cancer diagnostics falls under. This is like kind of early screening, early detection, non-invasive cancer diagnostics. Is that fair? It's a bit of a mouthful.

16:34Emmet:Yeah, I think so. Yeah, I think there's an awful lot of satellites in the orbit around cancer, but I think what you've just said is spot on. Yeah. So there are a few companies. so do you want to give us a bit of a backstory about kind of the industry and what it does exactly oh I definitely do I think that's through I'll through I'll run through the names and kind of the performance so far good and then I'll talk about the stock that I have bought in Horizon that has done quite well and I'll explain some more about it and before I do because I can't find a natural segue Mike we had an important conversation last week and a long-time listener and friend of my Wall Street and subscriber Matt Jones told me that the word fluke is indeed used in America but it's generally in relation to an event like that shot was a fluke but the Irish expression of calling somebody a jammy fluke appears to be uniquely Irish so that settles that I just wanted to put that down on verbal record so it stands against the annals of all the other stuff we said just as important if not more so important someone now let me move on so let's just talk about the industry of cancer which i don't like saying or using those words because well i think listeners know the intent of what i'm trying to say so for most of modern medical history cancer diagnosis has had a very specific path that all oncologists have followed and a lump is found a scan is ordered a biopsy is taken and and what i think can be described as a unquestionably very difficult journey begins and something that's invasive and uncertain um i'm sure painful and sickening and sadly often too late um but thankfully cancer diagnostics is moving very rapidly from spotting a lump on a scan to this really rich and continuous molecular picture of what's happening in your body and and it's from just one thing blood and as with most things it's also getting a power up with ai ai acting as an extra set of i suppose superhuman eyes you might say yeah so yeah so we thought you to analyze has just you know grown exponentially in a very short space of time no question or doubt about it so we thought we'd give our commentary but but please folks do not treat anything that we're about to say as a reliable medical insight we're going to do our best but if you have anything of a concern get to a doctor don't bury your head in the sand move into 2026 with a plan in place so i want to just preface everything we're going to say to do not, I mean, be so foolish as to substitute anything we're about to say for a plan of action.

19:29Emmet:Okay, now let's start with the biggest change of all. The biggest change in this world is the rise of liquid biopsies. And instead of cutting into a tumor, doctors can now detect tiny fragments of cancer DNA that spill into the bloodstream. And And this thing is called circulating tumor DNA or CTDNA. And this is real tumor genetic material that's going around in your blood in a very, very low concentration, I suppose. And with one vial of blood, doctors can now in 2025 detect whether cancer exists in your body. They can identify the exact mutations that are driving that cancer. and they can also assess if treatments are working and in many cases and this is the powerful thing this ct dna that you can get from a vial of blood can spot relapse months before a scan and this has completely changed how recurrence for a start is monitored every surgery or chemotherapy like after surgery i mean say or chemotherapy instead of waiting for a scan which might be like every six months or something um which i can only assume is some kind of daily hell when you're when you know you've got this kind of scan that you're waiting to hear you've got the all clear on doctors can now track whether any microscopic disease remains and uh this is called in the in the medical industry minimal residual disease and if cancer is going to come back blood shows it first or at the very least blood can show it first and often shows it first and the implication of that discovery or that insight alone is absolutely massive for start treatment can now be adjusted to start earlier when the disease burden is at its tiniest and and the disease itself is at its most vulnerable and more most um open to to treatments now if we take that idea one step further in this particular scientific race.

21:42Emmet:Imagine going to your doctor for an annual checkup and being screened for over 50 different cancers all at once with a single blood draw, no mammogram or colonoscopy, no symptoms required. You don't need to have discovered something on your body. You just walk in and as part of your annual or biannual checkup, they just take a little bit of blood and they can have a look. And that's the promise behind multi-cancer early detection tests, which don't just look for mutations. They read the DNA methylation patterns they're known as, which are chemical signals that reveal whether not only if cancer is present, but in which organ it likely came from.

22:30Emmet:So now all of a sudden we've got this chemical messenger or in our blood that allows doctors to see if you've cancer and where did it originate and that truly is um we're starting to zero zero in on a family of diseases i as far as i understand cancer is a kind of a term that catches many many different diseases all with their own unique attributes and complexities and as normal people on the streets we just say cancer when in fact an oncologist will understand the ref refining that that word down implies an awful lot of different things so in real in large real world studies adding one of these tests to find out if you got circulating tumor dna to standard screening has increased the total cancer detection more than seven fold now that's in america amongst those who who have it and many of the cancers found have no routine screening programs at all.

23:35Emmet:Things like pancreatic and bile duct and ovarian cancers in some jurisdictions. So routine screening may not be in place. And that's the holy grail of, I was going to say of medicine, but of cancer. You want to find lethal cancers while they're still curable, aka not lethal. Now, I must say that these tests are not fully integrated international screening programs certainly not here in ireland not yet um they have false positives they have false negatives and uh and they cost a lot and those things are still a consideration so if you were to take the irish government to bring it into ireland they will assess how many false positives false negatives and how much how many euros does at cost but the direction of travel for this technology is unmissable like it's it's such a positive development for humankind uh it's it's bigger than we all know a bit like when um what's a good analogy none of us understood how brilliant smartphones would be until we saw them we knew we'd heard there's this thing coming out from apple or indeed most people haven't like those who haven't driven an electric car haven't really embraced how brilliant they are so if you take it you don't really know about something's brilliance until you see it or experience it and i mean as much as this technology is coming down um the line for all humans you've got to presume it will also be something for our pets as well so it's it's a living creature diagnostics thing and for the first time in history population-wide early cancer detection is technically possible yeah and i know I just wanted to jump in because it feels weird talking about this, like a very sensitive topic to a lot of people who are listening and the commercialization of it.

25:32You know, this feels like it should be should be in the hands of a few companies. But I guess this is how this is how it progresses. And you're talking about the direction, which I think is an important thing. We're still the very early stages of this. This isn't going to be a kind of wide scale adoption, especially not globally, not in Ireland for years and years. But it's the early stages of what is becoming kind of a new form of, I don't want to say treatment, but, you know, a step in the treatment process, we'll say. I think it's very important to just kind of realize that, yes, it's an incredibly sensitive topic.

26:07And I suppose the least important thing about all of this is, you know, making money from these companies. But I think it is.

26:14Emmet:That is correct. That is the least important thing. We want it to succeed if we never make a penny or we lose our shirts. I mean, this is for the benefit of humankind and creature kind, perhaps. Yeah. Like you can look at it as a critique of capitalism in general, that, you know, these companies have to make money for their investors and for everything else for it to come along this line. And maybe that's, you know, a greater view on the world we live in. But it is very encouraging to see kind of stocks like this that are truly trying to make the world a better place. And there aren't, if you're being cynical, there aren't a lot of companies that are out there doing it.

26:53And then the way they do it and stuff, you know, it doesn't have to be great. But just in the fact that there are a couple of public companies out there that if they succeed, cancer will be a smaller issue than it is today. Do you know? And a kind of like if you're putting a mission statement out there for a couple of businesses, a couple of businesses we're talking about. So in that sense, I know it is a sensitive issue and it almost feels a bit icky talking about it as if, you know, like stock goes up. But yeah, yeah. It's kind of the it's the necessary give and take, I guess, of this conversation.

27:28Is that fair?

27:28Emmet:It is. And if a capital prize wasn't on the horizon, companies wouldn't set out to achieve what they're out to achieve. Like it is, as you said, it's icky. It's an uncomfortable truth. But why are there hundreds or thousands of pharma, biopharma companies out there? Because they know if they crack the code and cure something that nobody else has cured, they are going to be vulgar, make a fortune. Like this is, and it is that capitalist pursuit that drives the pursuit, I should say. like if you take many moons ago i learned about this orphan drug status where a company can apply to be the only one to bring to market a cure or treatment for a specific illness and and so it's for it's for illnesses that are very very rare in society um i was invested in one 25 years ago called transchirotic therapies and they were out to cure illnesses that i would hope most people that everyone has never heard of, but they had a government protection bubble around them.

28:36Emmet:But the reason all of these things are in place, the orphan drug status, is because the companies need to get the reward at the end of the day in order to go out and do what they're doing. And that's exactly what we're talking about here. But what, above all else, do you and I, Mike, and all our listeners want? Well, we want someone to succeed, whether or not we ever even hear of them as companies, let alone as investments. And then, as I mentioned, AI has entered the doctor's surgery, as it were. And while blood tests are transforming the molecular side of diagnosis, AI is kind of changing how, literally, how we see cancer.

29:15Emmet:And modern AI is now assisting radiologists in reading things like CT scans, MRI scans, mammograms, PET scans. Like these are things that like an AI system doesn't get tired. It doesn't miss a subtle pattern at 4 a.m. in the morning because it's tired. It can scan tens of thousands of images and learn features that human eye frankly struggles to perceive. So like if you take in breast cancer screening, AI support is now detecting significantly more cancers while keeping false alarms at manageable levels. In lung cancer, it's flagging nodules that might otherwise have been overlooked. In prostate cancer, it's improving the targeting for biopsies.

30:05So I know there's a lot of debate in the wider world about AI.

30:11Emmet:AI, is AI peaking, is AI in a bubble? But when you consider just this avenue of the AI world, it's the earliest days of its deployment, and it's already moving the dial. And the same transformation is happening in pathology and tissue slides that once took pathologists, SARS to look through and evaluate, can now be scanned and diagnose and classify tumor types and grade the aggressiveness or whatever else that doctors look at measured immune response. I'm sure there's a whole big shopping list of things that a well-trained pathologist has to consider when they're predicting patient outcomes. And it's important to say that AI is not about replacing doctors.

30:54It's about giving them ostensibly a second brain.

30:59Emmet:It's like the assistant that never blinks or sleeps or wonders what's for dinner tonight. Do you know what I mean? Yeah, yeah. I think this is when we talk about AI, so much of it is focused around the build out at the minute. And we don't really talk about the industries applying it as much as we should. That's right. This is good evidence of the industries applying it and indicating how fast the results are coming. Yeah. So I thought it'd be worth it. So you're going to break down one stock at a kind of deeper level. but i thought it'd be worth it to just spin through the kind of this mini industry as a whole um yeah and just kind of talk about the year of 2025 because it's been an absolute barn burner yes it has yeah so i i've kind of given this like the the non-invasive diagnostic area i guess uh there are companies in the genomic space that are kind of their own thing so we're just going to look at four companies in the non-invasive space so the first we're going on is uh garden health it's this company you've owned for a while and you know this is this is this this is a spoiler i suppose it's the one you're going to give a deeper insight on so this is a pioneer in liquid biopsies um it offers tests like garden 360 and the shield blood test for early colorectal cancer screening then we have exact sciences uh this is known for non-invasive screening tests like colo guard have you ever heard of the company that you have to um defecate in a box and send to them in the post this is them uh they're there for targeting early detection primarily in colorectal cancer they've been a bunch of other tests as well they have grail uh specializes in multi-cancer early detection mced tests uh it uses meth methylation the u.s in this word right methylation based genomics and ai yeah and it's got a commercially available gallery test um so it finds kind of deadly hard to screen cancers and then the fourth i'm going to throw in here is natira uh nat yeah um so it's not exactly it's not exactly in the pure play early screening bracket it does have liquid biopsies and early detection tests but there's a lot more to the business beyond just oncology it's leader in like non-invasive prenatal testing transplant rejection testing hereditary genetic diseases but i want to throw it in just because it is somewhat in this industry and then also it is stan druckenmiller one of the greatest investors maybe of all time it's his largest hole and it's his largest holding in his investment firm Duquesne Capital so yeah one of the greatest investors alive makes that kind of move it's worth paying attention to so I pitched it for Horizon do you remember that yeah I went on a watch list and then I threw it in the basement yeah well I wish you bought it when you did so year-to-date garden is up 230 % give or take exact science is up about 80 % give or take caveat here being that Abbott Laboratories just agreed to buy it there a couple of weeks ago still we're talking about however grail okay is up about 450 year to date and then natira is up about 50 year today so there's a lot of reasons okay i can live with a 50 percent no yeah it looks it looks bad in comparison to the other three um like obviously it's 50 there's a lot of reasons why these stocks are doing well and they're not all universal but 2025 was seen as somewhat of a validation of the thesis that you know early detection and And liquid biopsies are the next step in cancer screening.

34:26So there's real momentum around a couple of Medicare reimbursements and showing up in financial results. They're all growing like wildfire. There's been a lot of positive clinical data to come out this year in favor of these companies as well. And then we also can't overlook the Abbott acquisition. So I think it's about$21 billion. They've decided to buy Exact Sciences for it. And it kind of makes every other company we're talking about here a potential acquisition target too, because there are pharma giants, diagnostic giants in this industry that buy up exciting companies like this, and they can kind of buy new capabilities.