Your Week In Brief

A Virus Takes Center Stage

Gregory Bergman
    Jan 24, 2020 3:15 PM  PT
Your Week In Brief
author: Gregory Bergman   

While the week of Jan 20 started with an American holiday, Martin Luther King Jr. Day, it was another holiday, the Chinese New Year, that percolated in the minds of investors as news of a SARS-like virus spread from China. The virus, a cousin to the SARS virus that wreaked havoc in late 2002, killing 774 people and wounding stock positions worldwide, has killed at least 17 people in China with more than 600 confirmed infected. At least one known case in America was found in Washington state, the victim having recently traveled from Wuhan, the Chinese city of 11 million residents where the virus is believed to have originated. Wuhan is on partial lockdown to contain the virus. Travel restrictions are in place. And Beijing has cancelled all large-scale New Year celebrations. 

This unhappy New Year's news saw Asian indexes tumble along with U.S. airline and tourist industry stocks.  American Airlines fell even after meeting earnings estimates.  Mainland China stocks were down 3.5% by midday Thursday as it entered the holiday.

The Week's winners--cringeworthy as the term is in the context of a health crises-- were vaccine stocks like Novavax Inx. (Nasdaq: NVAX). The company, which developed a vaccine for MERS (Middle East respiratory syndrome) in 2013, skyrocketed 60% after the company said it was working on a vaccine. Shares were trading at $7.76 as of early Friday.  Moderna Inc. (Nasdaq: MRNA) jumped a couple dollars Wednesday from $20.97 per share to $22.84 apiece, before correcting to $21.41 per share by early Friday. Moderna said it will also work on a vaccine for the new illness, which it plans to develop in collaboration work with the Coalition for Epidemic Preparedness Innovations (CEPI).

Stock in Inovio Pharmaceuticals Inc. (Nasdaq: INO) rose after that company said the CEPI has given it a grant of up to $9 million to develop a vaccine against the virus; its shares climbed from $3.27 on Tuesday to $3.97 per share as of midday Thursday on over 11 million shares that day.  By Friday morning, the stock had risen to $4.48 per share on over 14 million shares before 12pm EST.

Also, NanoViricides (NYSE: NNVC) jumped from $3.54 per share to nearly $12 per share before slipping back down after it issued 2.5 million shares. By Thursday midday trading bounced around in the $5 to $6 per share range on over $10 million shares; average daily volume is around 200k shares.  The stock rose yet again in early morning Friday trading to over $9 per share. As of Friday midday, it was trading at $8.64 on 30 million shares. 

Mask makers also saw their stocks rise as the number of infected patients continued to grow: Malaysia-based Top Glove Corp., the world's largest maker of rubber gloves, Malaysia's Hartalega Holdings, Kossan Rubber Industries and Supermax Corp –all saw their share price increase.  3M, whose masks are popular in China, has increased surgical mask production,  a critical step in quelling the crises. The company's stock has fallen over the last year on disappointing earnings and, at $178 per share is still far below its 12 month high in April 2019 of $219 per share.  It will take a lot of masks to move the stock back up past the $200 range. 

A Sickness of Another Sort

The American political system, arguably more divisive and partisan than ever before, began Senate impeachment trial hearings after the House of Representatives voted to impeach the president last month, making Trump only the third president to face an impeachment trial. Bill Clinton and Andrew Johnson being the others, the latter of whom sneaked out a victory in the Senate by only one vote (a two-thirds majority vote to impeach is required to remove the president from office). With the Republicans controlling the Senate, it is likely the Trump will be the third president to be impeached by the House only to be saved by the Senate. The fact that the market hasn't been shaken in the U.S. over the impeachment trial illustrates the stability, or rather the paralysis, of the American government. Short term, arguably a good thing for the markets. Long term, a bad thing for the nation. 

Netflix Shareholders Can Chill

Other major financial news this week centered on Netflix, whose stock rose over 7% on Thursday on nearly 17 million shares, nearly triple the average volume, closing at $349.60 per share. The spike has been attributed to traditional cable giant Comcast's reporting a net loss of 133,000 residential video subscribers, far more than the 19,000 it lost in the year-earlier quarter, as well as buy recommendations from two influential analysts: Stifel's Scott Devitt, who reaffirmed a buy rating and a $390 price target and Guggenheim analyst Michael Morris, who increased his 12-month price target from $400 to $420. This is a surprise to recent Netflix naysayers, who have been pointing to disappointing subscriber growth and increased competition as a reason to shy away from the stock. As of Friday midday, the stock was trading at $352 per share. 

After a rough week for China and the world, at least Netflix shareholders—if no one else—can chill. But then again, there is always Disney+ to worry about.