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Matthew D. McCall's  Instablog

Matt McCall is the president of Penn Financial Group (PFG), an investment advisory firm offering personalized portfolio management. Matt is also the editor of several newsletters including The ETF Bulletin, which publishes two real-time portfolios based on PFG's proprietary top-down approach to... More
My business:
Penn Financial Group LLC
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PFG Daily Blog
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The Swing Trader's Bible - Strategies to Profit from Market Volatility
  • Winners and Losers of Swine Flu Scare 0 comments
    Apr 27, 2009 02:32 PM | about stocks: GSK, GILD, BCRX, NVAX, SFD, MMM, EWW, ASR, PAC, OMAB, CCL, RCL

     

    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 winners 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.
     
    Winners
     
    GlaxoSmithKline (GSK) - Maker of Relenza, an inhaled anti-viral drug, said to be helpful against the 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), who owns the rights to Tamiflu and distributes it.
     
    Micro-cap names that are surging 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.
    Themes: transportation, swine flu, mexico Stocks: GSK, GILD, BCRX, NVAX, SFD, MMM, EWW, ASR, PAC, OMAB, CCL, RCL
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