The next swine/bird/dog/giraffe flu hysteria trade
The most recent hysteria peak was back in August/September 2009 and built over the course of the summer (April onwards). It’s building again – or will be very soon. Regardless of whether or not you’re convinced how much of a problem it really is, the World Health Organisation (WHO) showed last time that they’re prepared to stimulate overreaction in order to prevent under-reaction. Overreaction means over-investment by government and large businesses in preventing the potentially damaging effects. Doctor’s offices and hospitals reported thousands of masks and boxes of tamiflu being delivered that they didn’t need. As the media hype about this quietened down, do did the stock prices of the small biotechs that benefitted from the panic. This has already happened more than once.
The fact is though that it’s very difficult to know exactly when the time will be right for the next burst – and I’m not really going to try. It’s too much of an unpredictable mix of epidemiology, government panic, and media/public hysteria. There are a few good places to follow real flu related events. This twitter account is a good place to start. Here’s a nice map of the spread of recent reported/confirmed H1N1 cases.
The big boys don’t really benefit much, short-term, from the hype even though the reality is that they’re the ones providing most of the vaccines and anti-viral drugs; Tamiflu (Roche and
But this is not really what this post is about. Here are some of the little guys that really get the short-term bounce from the hype that we can trade – some of them are: Novavax (NVAX), AVI Biopharma (AVII), Generex Biotech Corp (GNBT), Biocryst (BCRX) and Hemispheryx Biopharma (HEB), Vical Inc., (VICL) and Sinovac (SVA). There are others too. Many of these are down 50% since the last period of hysteria. I’d be a buyer of all of these here although they might require some patience followed by a timely exit strategy. They are not without risk. SVA, for instance, is clearly a long way from a technical base.
I’m less interested in Insmed (INSM) in this space – not sure they’ll be around to benefit. Human Genome sciences (HGSI) is in this pot too but in contrast to Insmed, HGSI recently benefitted too much from other events so I wouldn’t be a buyer here – at least not for this reason. HGSI (and Elusys) also have anthrax treatments in the pipe. I’m not sure I’d be willing to advise investment in the next crazy panic on that one, especially if some guy is planning on spreading it via his underpants!
Disclosure: At the time of writing this (Jan 3rd, 2010) I don’t own any of these stocks but I will be building positions in several of them over the course of the next few weeks/months.
