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Coronavirus: An Opportunity For Returns

Mar. 04, 2020 12:28 PM ETBKNG, EL, MAR, ROP, SABR, TDG, TXN, CHTR, HEI, HEI.A, SYK5 Comments
Pelorus Capital profile picture
Pelorus Capital


  • I can't market time, but it's still worth exploring opportunities in today's market.
  • I (though I am not a virologist) also give my take on the biggest risk of this coronavirus event (hint: it's not the virus, but rather the response to it).
  • I give 3 companies I've been buying lately: Charter, Stryker, and HEICO.

Veteran fund manager and all-around good guy Terry Smith of Fundsmith has a good saying. "There are only 2 types of people: people who can't market time, and people who know they can't market time." The last week's selloff certainly makes one wish they could market time. I'll say right off the bat: I know I can't market time. The best I can do is think deeply about a business, try and figure out what I want to pay, and then buy the business and hold it. Sounds easy, but in times like this, it's not. So, I thought I'd write a little post here outlining my thought on the virus and what to do about it.

My View on The Virus (#NotAVirologist)

After this week's hullabaloo, it's worth taking stock of a few things. With regard to the coronavirus death rate, I think there are three important considerations. First, China has the world's largest smoking population and one of the highest incidence rates of smokers in the world, particularly among males, where an estimated 47% of males are smokers. As smoking affects the respiratory system, higher rates of smoking are also likely to lead to higher rates of death or complication from a virus that attacks one's respiratory system as the coronavirus does. Second, one has to dig beneath the death statistics to uncover the demographic trends. Without looking at the numbers, I would guess that deaths are higher among the elderly and among males (in part due to the smoking statistics above). Both of these are the case. Third, there is a high risk of unreported cases. Harkening back to 2009, H1N1 had millions of unreported cases that complicated the official statistics at the time. For cases that are not serious, or seem like a "normal flu", people tend

This article was written by

Pelorus Capital profile picture
I started as a value investor. I'm still a value investor, but I've learned that buying something at a discount to its intrinsic value means more than buying low multiple stocks. Return on invested capital matters, indeed, coupled with revenue growth it is perhaps the only thing that matters! So now, instead of buying low multiple stocks, I seek to do the following: Buy good companies. Don't overpay.Do nothing.

Analyst’s Disclosure: I am/we are long HEI.A, SYK, TDG, CHTR, ROP, CNSWF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (5)

Pelorus Capital profile picture
Bought SYK, CHTR and TDG today.
Thanks for your article. I agree with your philosiphy of being full time invested but I don't think market has suddendly transformed into great bargain... Current valuation are still highly inflated by central bank easing.

Concerning the virus data, I would point a more bearish approach on the fataliyy rate : the current fatality rate is currently reported over the overall number of cases and do not exclude people still being infected. As we are currently still in the very beginning of spreading of the virus, this lower a lot of the fatality rate. Present fatality rate calculed by death / death + recovery stand around 8%. This is way higher than the official 2,5% / 3,0% rate and is a real game changer. Considering this, I would still be cautious for the time being waiting for more info before investing!
Pelorus Capital profile picture
I would point out that there are likely millions of unreported cases. The fatality rate is likely nowhere around 8% or 3%, but substantially lower.
why not buy TDG instead of HEICO?
Pelorus Capital profile picture
I outlined in the piece, TDG valuation + leverage makes it more risky here. If it sold off to ~$525, I'd be a buyer.
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