Retirement

Which Stocks Will Be the Big COVID-19 Winners?

It’s natural during a crisis… Investors want to find the companies that will help solve the problem and come out as big winners.

In addition to serving as Chief Income Strategist at The Oxford Club, I’ve covered the biotech sector for 16 years – so I’ve seen this play out before.

Lately, there’s been a lot of speculation as to which companies will come up with the cure for COVID-19 and the effective vaccine to get us out of this mess and back to our lives.

The company or companies that do produce effective treatments and vaccines could make a mint.

Here are my thoughts on the potential winners of the coronavirus crisis

Cures

I’m not convinced there will be an all-out cure for this virus. There are a lot of brilliant people working on it. But there are a lot of brilliant people working on other tough-to-treat conditions, and it’s not easy.

It typically takes a long time – years – to cure diseases. This is a brand-new virus, and I don’t expect a “cure” to happen anytime soon.

Hydroxychloroquine, the drug that President Trump has been talking about, has shown some anecdotal evidence of working. But that’s it. There has been little real science to back it.

I even saw one news story that a Los Angeles doctor said that critically ill patients given hydroxychloroquine and zinc were symptom-free in eight to 12 hours.

So you’re telling me that some doctor in LA cured this brand-new nasty virus that has killed nearly 100,000 people and sickened more than 1 million in eight to 12 hours? If you ask nicely, maybe he’ll include a vial of snake oil with your hydroxychloroquine and zinc cocktail.

I’m not saying hydroxychloroquine can’t work – just that it hasn’t been proven to yet. I need to see a lot more scientific evidence before I’ll be satisfied that it’s a reliable treatment.

Treating patients early with anti-viral medications is probably going to be the most effective strategy (like taking Tamiflu within the first 48 hours of flu symptoms developing).

Johnson & Johnson (NYSE: JNJ) and Gilead Sciences (Nasdaq: GILD) are two leading drugmakers in clinical studies with anti-viral medications.

Anti-inflammatories from Roche Holdings (OTC: RHHBY) and Regeneron (Nasdaq: REGN) may reduce inflammation in the lungs, which could be a big help to sick patients.

Vir Biotechnology (Nasdaq: VIR), which has been public only for a few months, has made headlines lately with several collaborations on treatments, including with Biogen (Nasdaq: BIIB), GlaxoSmithKline (NYSE: GSK) and other companies.

Yet, they have no data and these drugs are not in clinical trials yet. So this one seems like a long shot, at least for anytime this year.

Again, I don’t believe we’ll see a “cure” in the near future. I think we’ll see treatments that can reduce the severity of the illness, similar to Tamiflu.

Vaccines

Vaccines will be an important part of the fight against COVID-19, and there are a lot of companies working on it.

Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said a vaccine won’t be ready for at least a year to a year and a half. Other experts believe it will take longer.

There are quite a few companies working on vaccines. So far, there is little to no scientific data available, and very few clinical trials have started.

Moderna (Nasdaq: MRNA) is considered one of the leading candidates. But keep in mind, Moderna has never brought a product to market in the 10 years since it was founded.

Moderna is a legitimate company, but this does raise the point that the coronavirus vaccine space is rife with penny stock companies that have never succeeded at anything other than issuing press releases full of hype.

I’m talking about companies like Inovio Pharmaceuticals (Nasdaq: INO) and Cel-Sci (NYSE: CVM) that have operated for decades without ever launching a product.

In fact, Cel-Sci has been in a Phase 3 study for head and neck cancer for nine years without releasing data.

But now these companies suddenly have found the answer to the world’s biggest problem in a matter of months?

Get out of here.

Some of the big winners won’t necessarily be in the healthcare space.

Non-Healthcare

Banks, for instance, are writing billions of dollars’ worth of loans to small businesses that are risk-free. These loans are guaranteed by the federal government.

So banks like JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC), as well as many smaller community banks, are collecting fees and underwriting these loans.

If I could lend money and Uncle Sam promised to pay me back if the borrower didn’t, I’d do it all day every day.

I also expect that companies with strong delivery components to them will continue to do well in the long run.

As we’re all stuck in our houses, many people – including seniors who have never used online delivery services – have begun or will begin to use them and see how easy and convenient they are.

Companies like Chewy (NYSE: CHWY), which ships pet food and supplies, Grubhub (NYSE: GRUB), and (as much as the pizza connoisseur in me hates to say this) Domino’s Pizza (NYSE: DPZ) are thriving now and likely will continue to in the future.

And lastly, no company has probably benefited more than Zoom Video Communications (Nasdaq: ZM). Everyone I know is having Zoom happy hours, Zoom family dinners and Zoom business meetings.

When the crisis is over, I expect a lot of people will to continue to use Zoom when they can’t physically be with family, friends and colleagues now that they see how easy it is.

As stressful as the coronavirus crisis is, it’s energizing to see businesses (and scientists) quickly adapt to the new reality and pivot to help satisfy the needs of the public – and reward shareholders in the process.

Good investing,

Marc


About

A master of the steady, reliable science of income investing, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report. He has also appeared on CNBC, Fox Business and Yahoo Finance. His book Get Rich With Dividends: A Proven System for Double-Digit Returns achieved best-seller status shortly after its release in 2012. He captures the hearts and minds of readers approaching their golden years in his daily e-letter, Wealthy Retirement.

 

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