Beneficiaries and Losers from the Swine Flu Scare

The scare of the swine flu has the market on edge to begin the week, with Mexico the number one concern. The news today is a déjà vu event that takes me back to the 2006 avian flu scare. Also think SARS. The big beneficiaries today may see their move short-lived and the losers could be presenting an opportunity for aggressive buyers. I am taking a good hard look at some of the losers today because as we all know - during times of fear investors overreact and that is when opportunities arise.

Beneficiaries

GlaxoSmithKline (GSK) - Maker of Relenza, an inhaled anti-viral drug, said to be helpful against swine flu. The CDC currently has a large amount of Relenza in its stockpiles, but could be forced to increase that amount if a large number of doses are distributed.

Gilead Sciences (GILD) - The company that developed Tamiflu, probably the most widely used and best anti-viral drug in the fight against the swine flu. Gilead receives royalties from Roche Pharmaceuticals (RHHBY.PK), who owns the rights to Tamiflu and distributes it.

Micro-cap names that surged Monday on the news of the swine flu include Novavax (NVAX) and Biocryst Pharmaceuticals (BCRX). Novavax has been working no several different vaccines and could be in a position to quickly get the vaccines to market if needed. Biocryst is working on a flu drug, peramivir, which could get a boost from the need for new influenza drugs.

3M Company (MMM) up slightly after announce it was upping its production of masks you see the citizens of Mexico wearing.

Losers

The iShares Mexico ETF (EWW) was down as much as 8% on Monday, this is one session after hitting a fresh three-month high.

The hardest hit stocks have been the three Mexican airport operators that trade in the US. Grupo Aeroportuario (ASR), Grupo Aeroportuario Pac (PAC), and Grupo Aeroportuario Del Centro (OMAB) were all down at least 13% on Monday after the US put travel restrictions on the country.

Also down big were the two large cruise line companies, Royal Caribbean Cruises (RCL) and Carnival Corp (CCL), both falling double-digit percentages.

The AMEX Airline Index was also down over 10%, being let lower by the big-name airlines that have exposure to Mexico and other international destinations.

Smithfield Foods (SFD) is another company that is down over 10% due to the swine flu scare. Because the company is a producer of pork it be lumped into the fear selling. Keep in mind as of now, the swine flu is not contracted through eating pork.

Comments

[TrojanOne:]

I doubt anyone would go on a cruise to Ensenada, Mazatlan, Cancun, or for that matter to Liverpool.

Don't invest in mmm, invest in who ever sells alcohol based high powered facial and hand cleaners. Air sprays that help clean air and work surfaces for cash registers and computers and telephones should do well too.

Apr 28 10:56 AM

[MikeyLV:]

3M is a joke and they know it. The molecule size of swine flu is smaller than the weave of the bad fitting masks they are selling to the fearful (including on-air doctors who should know better). The mask needed is the type used to prevent TB, the smallest airborne molecule for person-to-person transmission. These are called duck-bills as they look like a duck bill. They need to initially be fitted and tested as they are made in different sizes.

Apr 28 12:25 PM

[jculley:]

I work in a coal fired power plant and those 3M masks are banned from use because they don't offer any protection against fly ash, coal dust or asbestos. I can't imagine they would help at all against a virus, even if they actually got a seal.

Apr 28 12:38 PM

[thomcalandra.:]

In the news we can use category might be this: Scientists, health agencies and medical personnel almost surely are grateful that secular themes of viral outbreaks/epidemics/pa... are getting serious attention. That means better 'best practices' in the field, as well as more funds for existing and devloping anti-virals; for diagnostic tools; for vaccine research and production.

-- thom calandra

Apr 28 11:44 PM