Here’s How Best to Profit From the Market Downswing
Market Correction Presents Opportunity for Investors
The stock market is in free fall right now. Between the novel coronavirus (COVID-19) causing global panic and the recent plunge in oil prices due to tensions between Saudi Arabia—and to a lesser extent the Organization of the Petroleum Producing Countries (OPEC)—and Russia, stocks have seen a severe decline in value, making many investors sweat.
And this, my friends, could be a great opportunity to make some serious profits. We’ve seen time and time again that people who are able to keep their cool in times of panic often end up scoring big on the upswing.
Yes, the sky may seem to be falling right now, but regardless of whatever troubles the stock market experiences now, there is bound to be an upswing later. And when that time comes, we can anticipate huge gains in several major industries.
Here’s how best to take advantage of the current market correction.
The first order of business is to hold firm on one’s investments and not feel pressured to sell. Many investors let fear get the better of them in these situations and begin trading away valuable assets at fractions of their worth. Don’t be like them.
Instead, investors should reassess their holdings and consider which ones are likely to recover. For instance, if a particular tech stock is down right now because the overall market is down—and not because of what that company has been doing—then that stock will likely have a healthy recovery.
The next move is to determine which stocks are likely to not only recover from the current market downturn, but thrive from it.
To my mind, there are two major industries that are poised to see big gains in the near future as a direct result of the market forces at play right now: pharmaceutical stocks and renewable energy stocks.
Coronavirus Propels Pharmaceutical Stocks
Without a doubt, the biggest curveball this year as far as the stock market is concerned is the coronavirus hitting with such force.
I’ve seen several people walking around with masks covering their faces, colleges forcing students to attend classes online, and stores running out of toilet paper and other essential goods.
It certainly feels apocalyptic, and if the media is to be taken at face value (always a dangerous consideration), you’d be forgiven for feeling like this was indeed the end of days.
But we all know that this is probably not going to be that calamitous. As I’ve written before, the coronavirus is no doubt a threat and we should treat it as such, but we’ve seen panic arise over past sicknesses like SARS and Swine Flu only to have them disappear without having caused much damage.
While COVID-19 may be more dangerous than the previous scares, at the end of the day, the risk is likely overblown.
But with the panic kicked into high gear as pictures of quarantines flood in from around the world, it makes sense that investors would begin to worry.
But if the coronavirus doesn’t end up being all that bad, we can anticipate a swift rally on the stock market that will make many investors very happy that they invested on the downswing.
Furthermore, as scientists search out a vaccine for COVID-19, we’re going to see several pharmaceutical stocks see healthy gains as companies race to be the first to get a product on the market that can competently combat the virus.
We’ve witnessed a couple pharma stocks see large gains as their companies attempt to develop a coronavirus vaccine.
The most well-known one at this point is Moderna Inc (NASDAQ:MRNA), which recently submitted a vaccine to U.S. researchers for testing. (Source: “Biotech Company Moderna Says its Coronavirus Vaccine Is Ready for First Tests,” CNN, February 26, 2020.)
This vaccine is still about a year away from being approved, but during that time, there will be a number of tests and trials. With each successful trial—so long as COVID-19 remains a powerful threat—we can expect to see big gains from MRNA stock.
Another pharmaceutical company, Gilead Sciences, Inc. (NASDAQ:GILD), saw its share price go up following news that the company’s drug “remdesivir” is showing signs that it may be able to treat the coronavirus.
An official at the World Health Organization (WHO) has lent solid credibility to Gilead’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. If the drug proves to be effective in combating the coronavirus, we could expect to see GILD stock rise in short order.
Gilead 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 has already been used to treat SARS and MERS, which are different strains of the current coronavirus. Since the drug is already approved for use on those strains, Gilead stock could actually see a faster rise than most if the drug proves to be effective on COVID-19.
It’s especially heartening that the company is operating in China right now, the current epicenter of the disease.
Chart courtesy of StockCharts.com
Renewable Energy Stock Growth
Another industry set to see big gains in the near future is renewable energy.
Renewable energy stocks already received a shot in the arm with Tesla Inc (NASDAQ:TSLA) showing immense and fast growth to start the year, exceeding expectations.
And the recent oil industry crisis is another huge boon to green energy stocks.
The oil industry crisis was brought on mainly by Saudi Arabia increasing production while also cutting prices. The kingdom undertook this maneuver as it feared that the coronavirus would harm oil production moving forward.
At first, Saudi Arabia wanted the OPEC countries and Russia to cut oil production in order to support oil prices. When Russia opposed that plan, Saudi Arabia reversed course and increased oil production and offered a discount. (Source: “Oil Crash: Why Saudi Arabia Has Started a Global Crude Price War,” Financial Times, March 9, 2020.)
Russia wanted to wait out the virus, not certain that its impact on the oil industry would be overly dramatic (while also interested in potentially seeing U.S. shale producers shutter as a result of lower oil prices).
Politicking aside, the end result is that oil has dropped tremendously in value in a short period. And that means many companies are facing bankruptcy while oil investors are feeling burned.
That, in turn, opens the door wide open for renewable energy stocks to rise. Already seeing a healthy increase in investment in 2020, renewable energy is among the many potential tech revolutions that could redefine our society.
Furthermore, companies like Tesla have shown that there is a lot of money to be made from green energy stocks.
With confidence growing in green energy and waning in oil, there’s a good chance that many investors will seek to shed themselves of the volatile oil market—renowned for wild swings—and instead focus on a sector that, for the most part, is poised to only go up.
Chart courtesy of StockCharts.com
The stock market is as volatile as it has been in years. We’re seeing seismic changes spread throughout the market, with many investors unsure of what to do.
Panic, though, is the investor’s worst enemy. Panic selling leads to rash decisions that aren’t made out of sound logic and planning, but out of fear.
With that in mind, there are a number of companies that could actually profit from the current state of the market.
The first industry that is likely to see growth is, as you’d imagine, the pharmaceutical industry as it works to contain the coronavirus. Several pharma companies are aiming to vaccinate against—or treat—the virus. If any of them prove to be successful, and if the virus proves to be truly devastating, then we can expect those pharma stocks to rise.
Renewable energy stocks are also a solid option in the current market. While many of these stocks have dropped in recent days as a result of the overall market volatility, the truth is that green energy stocks will likely soar when the market stabilizes.
Furthermore, the current oil price war is only going to help spread enthusiasm for renewable energy stocks as investors grow weary of all the politics involved with oil production.
Yes, we have a worried market overall, but as in times past, a down market is often one of the best opportunities for investors to make some serious money.