Bear Stearns' Avian Flu Index (SPI, GE, MEDI, STJ)

by: Yaser Anwar

Bear Stearns yesterday advised investors to get rid of airline and retail stocks to guard their portfolio against the Avian flu. The investment bank told investors that they should favor blue-chip utilities instead.

The bank warned that a worst-case scenario could send the stock market lower by 46% over the course of a year.

The Telegraph quoted a Bear Stearns report as saying, "We believe the imminent arrival of bird flu in the United States will bring this potentially devastating disease back into the limelight. We believe investors should consider a basket of stocks to inoculate their portfolio from this source of risk," it said.

The bank has "published a list of 40 worldwide stocks with weightings according to how they fared in Asia's SARS epidemic in 2003," says the Telegraph.

Among its recommendations:


* Utility company Scottish Power PLC (SPI)
* Industrial group General Electric (GE)
* Biotech companies Amgen Inc. (NASDAQ:AMGN) and Medimmune Inc. (MEDI)
* U.S. health group St. Jude Medical Inc. (STJ)

Sell (or sell short):

* Hong Kong's Hang Seng Bank (OTC: HSNGY)

Bear Stearns' report is the first of its kind for advising investors how to protect their wealth from the bird flu. Though the bird flu has not yet reached the U.S., scientists believe that the disease will enter first through Alaska.

Human contractions of the bird flu have occurred in Cambodia, China, Indonesia, Thailand, Vietnam, Azerbaijan, Turkey and Iraq, according to the World Health Organization.

Though humans have contracted and died from the disease, they have done so through contact with birds.

The avian flu has not yet mutated into a human-to-human disease. If that happens, as the Bear Stearns report anticipates, it could result in a worldwide pandemic the likes of which has not been seen since the Spanish flu outbreak in 1918.