Wall Street’s Italian Job; Gilead’s Gilded Lead
The Kings of Wishful Thinking
“I’ll get over you; I know I will. I’ll pretend my ship’s not sinking.” — Go West
Don’t look now, but we have our first major COVID-19 outbreak in a Western country.
Italy announced over the weekend that the number of confirmed coronavirus infections spiked to 230 patients. In response, the Italian government locked down an area of about 50,000 people near Milan.
And the market? The market responded exactly as I said it would once COVID-19 hit a Western country: It sold off hard.
The Dow plunged more than 900 points, attracting gawking financial writers across the board. All three of the major market indexes dropped an average of 3% today.
But Mr. Great Stuff, weren’t South Korea and Iran also in the news?
Yes, dear reader, this is true. South Korea is rapidly nearing 1,000 confirmed COVID-19 cases and raised its virus-threat alert to its highest level. Additionally, Iran announced a surprise of 12 deaths from the virus and confirmed 61 cases.
I’d argue, however, that Italy was the bombshell that truly sank U.S. markets. COVID-19 has spread across several other countries since its outbreak, with little to no real reaction from Wall Street. The fact that the virus is now spreading in a European country makes the situation more real for U.S. investors.
Minus Italy, the markets would’ve dipped today … but not 3%.
This will only get worse from here.
I hope you’re all healthy and doing well today … as well as can be expected amid a fear-induced market sell-off.
In fact, you should all be faring much better than the overall market today.
Because you read Great Stuff!
We’ve warned you about a market sell-off for more than a month now. In fact, we:
- Urged you to prepare for this eventuality.
- Advised you to add gold and other stores of value to your portfolio.
- Recommended trimming your speculative holdings.
- Gave you four “no fear here” stocks to beat COVID-19 in your portfolio.
Now that is some great stuff!
But I hear you, dear readers … I hear you.
You want more. You need more. And I have just the solution for your COVID-19 fears. His name is Ted Bauman.
Around here, Ted is the diversification duke … the well-balanced baron … the equal-opportunity emperor. What I’m trying to say is that Ted knows the market will stay irrational as long as it dang well pleases … and you should prepare for any scenario.
That’s why Ted’s model portfolio in The Bauman Letter is actually three diversified model portfolios in one:
- The “Base Hits” portfolio for investing in long-term gain opportunities in solid, financially stable companies.
- The “Home Runs” portfolio for impressive shorter-term opportunities — those quick stock rallies that most investors will miss in a blink in these volatile times.
- The “Endless Income” portfolio for opportunities to generate income in the meantime.
How’s that for diversified?
Trust me when I tell you that Ted is the man to have in your corner when uncertainty pangs hit the market.
Good: The Golden Ticket
Did you add gold to your portfolio last month when Great Stuff touted its benefits? If you had, you might be up about 6% on that position right now. That’s how far gold prices have run in the past month.
Today, the April gold contract rose roughly 2% before retreating. COVID-19’s spread outside of China has many investors worried, and gold is the go-to safe-haven investment for just these situations.
Right now, gold hovers at its highest levels since January 2013, and it’s creeping up on the psychologically important $1,700 area.
Psychologically important? Yes, well … people like neat, round numbers, and $1,700 fits that bill nicely. Furthermore, gold hasn’t traded above $1,700 since 2012. That’s an eight-year hiatus from these heights, and a breakout here could be a sign that investors are finally pricing appropriate risk into the market.
Naturally, Wall Street isn’t quite ready to admit that it needs the kind of protection that a $1,700 gold price would indicate. So, the malleable metal pulled back just before hitting that high today. Gold will eclipse this level, however, regardless of Wall Street’s denial.
In other words, there’s still a little time left to profit from gold’s safe-haven rise.
Better: Distant Relations
Well, Zoom Video Communications Inc. (Nasdaq: ZM) is experiencing a similar renaissance. The stock is among the few gaining ground amid today’s virus sell-off because it allows all those corporate meetings to still take place remotely — lucky you.
Back on February 4, Stephens analyst Ryan MacWilliams laid out the case for Zoom: “We believe investors are betting on paid user growth as a result of increased cloud video meeting usage, due to concerns around physically meeting due to the coronavirus.”
With COVID-19 cases on the rise outside of China, MacWilliams’ scenario for Zoom is driving the shares even higher today. More and more businesses are canceling events and meetings out of fear of contracting or spreading the virus. As such, video-teleconferencing companies like Zoom stand to benefit greatly due to increased subscriber numbers.
Zoom will report fourth-quarter earnings on Thursday, March 5. While last quarter’s numbers won’t show significant impact from COVID-19, analysts expect guidance to be stronger than many project due to increased usage amid the outbreak.
Best: Gilead and the Odyssey
In the Bible, the name Gilead can mean “hill of testimony” or “heap of witness.” Not to be too crass, but a “hill of testimony” is exactly what Gilead Sciences Inc. (Nasdaq: GILD) investors hope to gain from COVID-19.
According to the World Health Organization (WHO), Gilead’s experimental antiviral drug, remdesivir, could be effective against the coronavirus. The claim was reported by CNBC in a press conference with WHO, which identified Gilead’s drug when asked about potential treatments for the virus.
Here’s the real kicker for Gilead, though: Remdesivir hasn’t been approved for use anywhere in the world. In other words, the ongoing clinical trial for remdesivir in the treatment of COVID-19 is a really big deal for Gilead. It could provide key information on the drug in human testing — i.e., providing a “hill of testimony” that could get the drug approved in multiple nations.
On a side note, there are currently only two WHO clinical trials for COVID-19 treatment: One is for Gilead’s remdesivir, and the other is for AbbVie Inc.’s (NYSE: ABBV) ritonavir. Just so you know, AbbVie is one of Great Stuff’s “no fear here” picks to beat the coronavirus.
Markets hate uncertainty and the coronavirus represents the most uncertain macro risk markets have faced in years. … Investors are also acutely aware that many misjudged the economic severity of the virus early on, making them more open to entertaining worst-case scenarios now.
All I have to say about this is that Alec Young needs a subscription to Great Stuff. He could’ve found out about this weeks ago.
Luckily for you, dear readers, you haven’t had to wait for more than a month to find out what Mr. Young is finally coming to realize.
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Until next time, good trading!
Editor, Great Stuff