Coronavirus Causes Stock Market Shake-Up & Opportunity
They say that every failure is an opportunity. That translates well to the stock market. While the coronavirus (also known as COVID-19) is largely causing share prices to fall, there are a number of companies that are poised to see huge gains from the coronavirus.
Below I’ll tackle the top three “coronavirus stocks” that are poised to see huge gains in the wake of the epidemic. But first some background.
The coronavirus has been making headlines around the globe recently. With thousands of infections worldwide (though the virus is primarily contained in China at the moment), concern is building over a possible pandemic causing havoc around the world.
And that havoc could translate to markets dipping or collapsing.
That’s the worst-case scenario, financially speaking. I’ve gone on record, however, saying I think the concern surrounding the coronavirus could be premature.
Consider that so many pandemics of the past failed to live up to the world-ending proclamations that many people had made.
Swine flu, SARS, Ebola… each had its day in the media sun, scaring people and making them believe that the world was ending. But each outbreak came and went. Yes, of course they were devastating to those affected, but ultimately society did not collapse and the death tolls didn’t reach anywhere near Spanish Influenza levels.
We’ve seen this show several times before and it’s best not to get too worried before we have the facts.
But people, especially investors, are not always known for making cool-headed decisions at all times. That’s a huge reason why we’re seeing the sell-off in the stock market right now: fear.
People are afraid, and when they’re afraid they act rashly. In this case, causing markets to fall.
But here’s the thing: this could be a huge mistake. If the coronavirus turns out to be another false alarm of sorts, we could anticipate the stock market to make a huge comeback in the coming days and weeks.
You don’t have to look far to find doomsayers. Scott Minerd, chief information officer of the global investment firm Guggenheim Partners, LLC, is one such person.
Minerd said the economic harm from the coronavirus outbreak could be “worse than the financial crisis.” (Source: “Coronavirus Fallout Could Be Worse Than the Financial Crisis,” Axios, February 28, 2019.)
It’s worth noting that Minerd is a member of the New York Federal Reserve’s investor advisory committee, and he said officials had contacted him to create “some sort of monetary coordination.”
On March 3, the U.S. Federal Reserve cut its interest rate by half a percentage point. Other central banks are also likely planning to cut interest rates and/or provide other types of financial stimulus.
So what we’re seeing here is a lot of consternation about COVID-19, but without having all the facts. That provides a lot of opportunity for investors to make a healthy dollar on the upswing.
Top Three Coronavirus Stocks
Another investment opportunity is to profit from the companies that are tackling the coronavirus in some way. And that brings us to the top three stocks that are poised to benefit from the coronavirus.
The first company on this list is, as of right now, the closest to getting a coronavirus vaccine to market: Moderna Inc (NASDAQ:MRNA).
The U.S.-based pharmaceutical company was the first to submit a potential COVID-19 vaccine to U.S. researchers for testing. (Source: “Biotech Company Moderna Says its Coronavirus Vaccine Is Ready for First Tests,” CNN, February 26, 2020.)
Its share price rose by more than 20% by early afternoon on February 26 after the news was announced.
The coronavirus, however, creating such a volatile and speculative market, meant that MRNA stock was bound to fluctuate after the news was released. And that’s just what has happened.
Still, the overall impression is that Moderna stock is rising and won’t subside anytime soon. The stock has surged by nearly 50% over the past month, with virtually all of those gains thanks to its possible coronavirus vaccine.
The company was able to develop the vaccine in just six weeks, but this is the pharmaceutical industry; we may be waiting months upon months for testing and trials to be completed before the vaccine can be released to the public.
All that being said, MRNA stock is on the rise and we’re seeing the potential for this pharmaceutical stock to see huge growth in the coming months if the coronavirus turns out to be as devastating as some predict it will be.
On the flip side, there’s a lot of speculative money that could be made from Moderna stock, as the media will certainly continue to focus on COVID-19 for the foreseeable future.
Gilead Sciences Stock
Moderna isn’t the only company aiming to turn the search for a coronavirus treatment into profits. Shares of Gilead Sciences, Inc. (NASDAQ:GILD) went up following news that the company’s drug “remdesivir” is showing signs that it may be able to treat coronavirus.
An official at the World Health Organization (WHO) has lent solid credibility to the company’s hopes to combat the disease.
“There is only one drug right now that we think may have real efficacy and that’s remdesivir,” said Bruce Aylward, an assistant director-general at WHO. (Source: “Gilead Sciences Drug Remdesivir May Help Treat Coronavirus Symptoms, According to WHO,” CNN, February 25, 2020.)
WHO officials said that clinical trials with remdesivir were being undertaken on human subjects, with results possibly coming within weeks. (Source: Ibid.).
That quick turnaround means we could see huge gains for GILD stock if the company is shown to have a strong treatment for the virus. Gilead Sciences stock should particularly receive a boost from China, where the disease is the most prevalent.
The company is working with China on two trials for patients who have been infected with COVID-19.
“The two studies — one in patients with severe disease and another in patients with moderate disease — are currently enrolling participants and we anticipate results in April,” wrote a Gilead Sciences spokesman. (Source: Ibid.)
Remdesivir is a promising treatment for coronavirus, as it has been used to treat similar viruses like SARS and MERS, which are different strains of the current coronavirus.
All that is to say GILD stock is poised for big gains if the company’s drug proves to be useful in the fight against COVID-19. Gilead Sciences stock has already climbed about 10% since the coronavirus crisis began picking up steam.
The third company that is looking to make a big jump due to the coronavirus is Zoom Video Communications Inc (NASDAQ:ZM).
The cloud-based U.S. company that specializes in remote conferencing has seen its shares rise as more people turn toward remote online tools to help mitigate the risk of contracting the coronavirus. After all, working from home, with the lack of coworkers, makes some people feel safer from the disease.
“In the last 30 days alone, average daily downloads are up 90% versus the prior 30-day period, with greater user engagement as evidenced by a 17% increase in user session per day and a 3% increase in average session length,” wrote Alliancebernstein Holding LP (NYSE:AB) analyst Zane Chrane. (Source: “Zoom Video Is Seeing a Surge in Downloads Amid Coronavirus Panic, Analyst Says,” MarketWatch, February 26, 2020.)
This means that, over the past few weeks (coinciding with the coronavirus outbreak gaining widespread media attention), the company has seen a rush to use its services.
In other words, Zoom Video is an ancillary company in relation to the virus threat. It does not directly deal with COVID-19, but people may seek out its services due to their concerns about face-to-face contact.
ZM stock has climbed about 50% over the last 30 days. I anticipate that this growth will remain steady as more people seek to lower their chances of infection, not to mention that more people have been gravitating toward remote work in general.
Chart courtesy of StockCharts.com
The future of the coronavirus and just how deadly and widespread it will be is yet to be determined.
What has been determined, however, is that opportunities abound on the stock market, no matter how the situation develops.
If the coronavirus ends up being more hype than anything else, then we can expect a healthy rebound in the stock market, sending many shares flying.
If the virus grows increasingly dangerous, then there are several pharmaceutical companies looking to directly combat the disease (and grow their share prices in the process). Meanwhile, technology companies could also benefit in novel ways.
All in all, this is a great market for savvy investors right now (with, of course, everyone hoping that the virus fizzles out and as few people as possible suffer from it).