Stocks and Sectors That Could Catch Swine Flu Symptoms

Obama administration officials have announced that students at a New York City high school were sickened by the same strain of swine flu that has killed people in Mexico, adding to fears in the U.S. after cases in Texas, California, and Kansas. There are now 20 confirmed cases of the deadly flu in five states. Meanwhile, the World Health Organization yesterday declared the outbreak of the virus “a public health emergency of international concern”. No, you’re not being inappropriate if you’re wondering: How will this affect the markets this week?

In times like these, it’s good to look at comparable situations in the recent past, which this article from the Daily Telegraph does:

During the panic about Asian bird flu in 2005 and 2006, airline, hotel groups, insurers, and oil companies stocks fell heavily, while shares in drug, healthcare, and cleaning product businesses soared.

“I think there will be little bit of a lift for pharmaceuticals, but this may not follow through unless the situation gets out of hand,” said Paul Kavanagh of stockbroker Killik & Co.

To be clear, at this point, there’s a lot of uncertainty around the swine flu situation. Uncertainty, however, has proven to be a big market mover in the past year. Further, even the slightest new information about such a potentially explosive issue could have a significant effect on the markets. Here are some possibilities in the short term.

Sectors that could be hit hard:

• Transportation: Travel advisories and recommendations to stay home won’t help transportation stocks, or ETFs such as IYT.
• Energy: Fewer people flying and traveling in general could cause weaker overall demand for energy and crude oil funds (ETFs like USO).
• Equities in general: As we’ve seen in the past six months, a little bit of uncertainty can go a long way towards causing equities to tank; this can also affect ETFs that index equities, such as SPY and VTI.

Sectors that could get a lift:

• Pharma and Healthcare: In anticipation of demand for vaccines and health services, shares of pharmaceutical and healthcare companies could appreciate; also ETFs like IRY and IHE.
• Gold and Commodities: In the last year precious metal ETFs have been popular buys on days when panic seemed to set in; e.g., GLD, SLV.
• Treasuries: Similarly, a flight to safety away from equities could make for inflows in bond funds thought to be very secure; e.g, IEF, TIP.

Again, these are just some of the possible short-term effects we could see resulting from the swine flu epidemic news. The swine flu coverage will be in the media simultaneously with other economic announcements, so it’s anyone’s guess where things will end up. Further, it’s worth remembering that at this point, even the authorities have limited information on and predictive power over the swine flu situation; as the situation changes and becomes more or less clear, the markets will continue to absorb the information. Either way, it will be interesting to see the movement this week.

Disclosure: At the date of publishing, the author currently owns shares of TIP and VTI.

Comments

[Hedged In:]

On Treasuries -- it's interesting that the consensus is that they're a short. News like this could cause a rush of short covering.

Swineflu is probably good for video-conferencing -- long trade on Polycom (PLCM) for 4-6 months?

Apr 27 02:06 AM

[HaavBline:]

Like SARS, worst case this will be resolved in a matter of months. So if any sector responds sharply to this flu, it would be a good opportunity to take the opposite position.

Apr 27 02:36 AM

[schlumpf:]

Swineflu is probably good for les blogs from Cetin.

Apr 27 08:57 AM

[Consider_this:]

If the flu is an pandemic and spreads to mainland, you forgot these industries:

1. Retail
2. Restaurant
3. Entertainment, esp those with a gathering of people, like theme parks, beaches and theatres.
4. Public transportation
5. Hotel

Basically, anything that cannot be done in isolation and away from groups of people.

I hope it doesn't spread very wide, and I hope it's not deadly like SARS.

Apr 27 11:27 AM

[Everyday Fi...:]

Airlines, Casino, Hotel stocks likely to suffer; I posted full range of the biotechs/vaccine developers and possible options/alternative investment plays here as well:

www.darwinsfinance.com.../

Apr 27 11:28 AM

[Consider_this:]

You kidding me?! "A matter of months?"?

SARS was absolutely terrifying and destructive on the economies it hit. Go back and read up on what happened to the local economies, even advanced ones like Hong Kong, Singapore, etc. See pictures of what happened to people's lives.

And it didn't just go away, it returned in a year.

Our best bet is hoping that this not as deadly as SARS -- which dissolved the lungs and organs of the affected people and had an abnormally high death rate. Even post recovery, the loss in lung function is permanently carried by the people it affected.

On Apr 27 02:36 AM HaavBline wrote:

> Like SARS, worst case this will be resolved in a matter of months.
> So if any sector responds sharply to this flu, it would be a good
> opportunity to take the opposite position.

Apr 27 11:31 AM

[chleoku:]

This is a perfect example on how this short term Swine flu news would all give us a bargain, once again, on equities. Time to stick to the long strategy and buy some more equities in 1-2 weeks:

www.wealthalchemist.co.../

Remember Swine flu is a threat short-term. But it would never change the intrinsic value of good companies

Apr 27 12:24 PM

[David White:]

You left out restaurants and retailers with big mall presences. If the swine flu becomes a pandemic, poeple will want to avoid anywhere there are large crowds. This will hurt those businesses. I don't think we are there yet, but it could happen. The Mexican president has asked for a shutdown of all non-essential business and government services. He says the safest place for people to be is at home. If the swine flu becomes a big problem in the US, the same will hold true. I have my doubts about Obama shutting everything down though. Still you never can tell.

May 01 12:27 PM

[Doc 224899:]

The swine flu over-reaction is ridiculously costly, but the Obama administration doesn't care about that cost. They're happy because we, America's citizens, are paying for a public relations campaign that Obamanistas have engineered to scare the public into approving of their bureaucracy-heavy lawyer’s-fee-generating "healthcare reform" legislative package.

That expensive healthcare reform plan entirely ignores a long-overdue legislative approach that would cut healthcare costs by about 70%: tort reform. The Obama plan is little more than re-packaged Clinton-style healthcare reform, which also protected the huge vig raked in by thieving lawyers. No surprise in any of this, except it is all so entirely true to form, and exactly the sort of government rule by manipulating public fear that was exposed by Michael Creighton in "State of Fear".

Even the new acting director of CDC (notice the term "acting director") has been careful to avoid statements that compare this batch of H1N1 virus from Mexico to normal human flu, and to the 1918 flu, but then we should understand that he's on a tight leash and wants to get a letter in the mail telling him he's the new full-time director of CDC, and if he told the public the truth he wouldn't have a chance to get that letter. He couldn’t even say, “You don’t get swine flu from eating dead pig meat because viruses die when the host organism’s cells die,” which is basic high school cell biology that everybody needs to be reminded of so they don’t eschew pork products

You'll also notice that in spite of the fact that isolation and quarantine have been the default strategies in infectious disease epidemic control for over a hundred years, the acting director of CDC couldn’t come out and call for sealing the border with Mexico, where the allegedly dangerous infection comes from, and where all the people carrying it into the US are coming from. Why is that? Could it be that doing so would finally establish one legitimate reason for correcting the porosity of the US-Mexican border, and Democrats don’t want to risk alienating Hispanics, even if it means increasing the risk of killing hundreds of thousands of Americans? (That’s the sort of risk that a real flu pandemic would entail, killing hundreds of thousands of Americans. The fact that the border isn’t being sealed may actually prove that it isn’t a legitimate pandemic flu risk.)

So let's look at this H1N1 and the alleged lethality risk it carries.

In Mexico there have been maybe a 100 to 1000 deaths (by the time you read this), reported to American newsies by Mexican officials who are bought and paid for by the American government and who would be utterly defenseless against drug gangsters if it weren't for US support and protection, and who will say whatever they're told to say. Right now they're busy hyping the flu scare and maintaining the silly fiction that drug gangsters in Mexico get their guns from Bob's Bait and Tackle in Waco.

Why are Mexicans dying of this flu? Well, maybe it's because the infection has greater lethality when it makes its initial jump from Mexican swine to humans, and less lethality in its first human-to-human jump, and not much after that. It's a common pattern. The other reason would be that Mexico sells antibiotics over-the-counter without prescription, so people in Mexico commonly self-medicate in a way that either under-treats bacterial infections or otherwise encourages antibiotic-resistant bacterial strains to flourish in Mexico, and Mexicans with H1N1 flu are dying from secondary bacterial respiratory infections that are either under-treated or that involve antibiotic-resistant bacteria. The third reason would be that healthcare in Mexico is even worse than healthcare in Canada or England, so people in Mexico generally just stay home and die or get Mexican healthcare and die when they get sick.

Biologically, this H1N1 viral strain in today's news clearly lacks the lethality factors that have been present in the serious pandemics in the past. In other words, it's wimpy flu, not big strong scary flu.

Thirdly, this H1N1 strain of flu has been infecting humans in Mexico for at least 4 months (just do a little googling for yourself if you don't believe me), and nobody had any reason to make a big deal about it until the Obamanistas needed an infectious disease scare to bully the masses with.

Oh, you ask, didn’t public health officials say there was a warning? Yes, they did. If you were a public health official, and you were in today’s political environment where every boss in the country has been shown over and over that survival today requires a keep-your-head-down-an... mode of professional conduct, you’d put out the warnings you were instructed to put out.

Oh, you ask, didn’t the WHO issue warnings? Yup, and who do you think funds most of what the WHO does every year, without bothering to go to congress for consideration of whether that funding is justified?

Give me a call when 36,000 people in America have died from this strain of H1N1 flu in a year, which is the average rate at which American’s die from normal flu in a normal year. Until then, I’m betting that I’ll be more likely die from being hit by a solid iridium meteorite than from infection with H1N1 flu.

May 03 01:55 PM