Coronavirus hysteria is officially sweeping the country, and the stock market is bearing the brunt of its economic impact so far. Stocks have been locked in a steady downtrend for weeks, but some companies have managed to hold up against the onslaught. These surprisingly resilient stocks all have one key attribute in common, they stand to benefit from the hysteria surrounding the coronavirus outbreak. These so-called coronavirus stocks could outperform the overall market throughout the course of the next few months.
COVID-19 Vaccine Stocks
The biotech firms are leading the race to develop an effective coronavirus vaccine. Whichever company can get there first will make a boat-load of money. These stocks are leading the charge towards a vaccine for COVID-19.
Inovio Pharma. (NASDAQ: INO)
Inovio is in the process of developing a vaccine for the novel coronavirus disease. The firm calls the treatment INO-4800, and phase-one studies should begin in April. Be aware that Inovio is a micro-cap biotech stock, so share prices could exhibit drastic reactions to both favorable and unfavorable headlines.
This company has lots of experience developing these types of vaccines. In fact, it already has a coronavirus vaccine in phase-two studies, but that vaccine targets Middle East Respiratory Syndrome (MERS), which is different from COVID-19. Inovio’s experience with coronavirus vaccines could give it a potential advantage in the race towards a viable preventative treatment.
Vaccines are preventative treatment, so they can’t help people that are already infected. As a result of the limited usefulness of vaccinations, many companies are trying to develop drugs that directly treat the disease instead. If one of these firms can roll out a coronavirus cure, their valuations will probably sky-rocket and so will their share prices.
Gilead Sciences (NASDAQ: GILD)
With a valuation of over $93 billion, this biotech stock is an absolute giant. Gilead is best-known for developing a breakthrough treatment for Hepatitis-C, and its experience combatting viral disease could prove to be very valuable in developing a COVID-19 vaccine. Right now, it has at least one potential treatment that’s already being evaluated as a possible COVID-19 treatment. In February, Gilead revealed that its drug remdesivir is undergoing phase-3 clinical trials targeting COVID-19. These clinical trials could include as many as 1,000 patients.
The assistant director-general of the World Health Organization (WHO), Bruce Aylward, said that his organization believes that remdesivir has the potential to be an effective treatment. Hopefully, the treatment proves effective and Gilead can get it out to the public soon. However, RBC Capital Markets puts remdesivir’s chance of success at only 50%, and Gilead is such a large firm that a cure is unlikely to have as large an impact on share prices as it would for a smaller biotech firm.
This spring’s hottest fashion accessory is a surgical mask. Pardon the dark humor, but it’s true. Individuals, government entities, and businesses are buying these things in droves. The mask-buying frenzy could benefit the companies that manufacture, distribute, and sell these products.
3M (NYSE: MMM)
3M is an industrial conglomerate that produces and sells hundreds of different products. However, the firm is particularly well-known for its line of protective face masks and respirators. Right now, there is an unbelievable demand for these types of products. Stores all over the globe are selling out of these protective products, so there is a significant gap between demand and supply. 3M is one of the largest companies with a notable presence in the face mask and respirator market, so it has the potential to bridge the gap by expanding the production of these products.
Facemasks and respirators might seem a bit trivial in the face of all this epic doom and gloom, but it’s important to remember that coronavirus concerns know no borders. This is a truly global problem, so the sheer scale of the market for these items right now is massive. Few companies have the capability to supply the international demand for protective products, but 3M is one of them. 3M is widely recognized as one of the world’s foremost producers of these types of items, so the firm also has brand recognition and perceived credibility on its side. The company could be a huge beneficiary of the global face mask shortage.
It looks like the market is going to be very volatile for the foreseeable future. One way to capitalize on this is by buying VIX ETFs. These funds track the movement of the CBOE Volatility Index, which measures the spread between bullish and bearish bets on the market. Buying VIX ETFs is the easiest way to capitalize on volatility, but these stocks can also be very unpredictable at times. However, traders that time the market correctly could generate massive gains by trading VIX ETFs.
This leveraged VIX ETF is one of the most aggressive ways to bet on volatility. It’s up well over 500% since the coronavirus crisis kicked into gear. However, like any leveraged ETF, this fund carries significant risks. This fund is very susceptible to after-hours gaps, so you could find yourself stuck with big losses without even having an opportunity to sell.
This ETF is not for the faint of heart. It is extremely erratic and it can fall just as fast as it rallies. However, traders who get it right could reap truly massive rewards. If you’re thinking about making a play on TVIX, compensate for the added risk by only purchasing a small, speculative position
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