For the last month investors have witnessed incredible market destruction. All gains under the Trump administration were wiped out. This represents roughly $9 trillion dollars of wealth was lost in the primary markets. The BEARS have slaughtered the BULLS, but investors who have played companies directly related to the Coronavirus out have fared well in these trying times. Although many of these companies are off from their recent highs, stocks like Ibio Inc. (NASDAQ: IBIO), Inovio Pharmaceuticals (NASDAQ: INO), Aytu Bioscience (NASDAQ: AYTU), Co-Diagnostics (NASDAQ: CODX) and others are well above where they were back in January. Do these now “household named companies” still have potential? Sure… but let’s pull away that first layer of companies who offered potential vaccines, drugs and test kits, and think outside the box and find the next layer of companies benefiting from this pandemic. Investors should not forget history. In the Californian gold rush the businesses that benefited the most were the pick and shovel makers not the prospectors.
Stay at Home Orders
As of Thursday night, California Gov. Gavin Newsome, has issued a statewide order for all residents to ‘stay at home’ amid a coronavirus outbreak. The stay home order is in place till further notice. Essential services will stay open, however, such as pharmacies, grocery stores, takeout and delivery restaurants, and banks. Other states across our great nation have similar mandates, NY and ILLINOIS joined Friday in effects whether they be total lockdowns, curfews or closings. When identifying this “next level” of potential plays, we need to first ask ourselves, what are our basic human needs? Quite simple…Shelter, Food, Health and Entertainment. So, let’s take a look!
If people are getting sick, medical and healthcare companies are going to be overwhelmed with business. We hear it all over the news there is a shortage of medical supplies. How hard is it to find hand sanitizer these days? People walking around wearing masks, another item that is near impossible to find. So, let’s look at a few of these companies.
Masks: NovaBay Pharmaceuticals (NYSE: NBY), 3M (NYSE: MMM) maker of the popular N95 mask, Praxsyn Corp. (OTCMKTS: PXYN), iFresh Inc. (NASDAQ: IFMK) can make 400,000 masks per day, all have had recent news of making or selling masks. IFMK also offers food delivery which doubles their potential as a play.
Viral Test Kits: Decision Diagnostics Corp. (OTCMKTS: DECN) is rolling out their GenViro! Covid-19 Rapid test kits. Some debate has been circulating over the weekend on the accuracy of serology tests …also Danaher Corp. (NYSE: DHR) who acquired Cepheid, the company in which the FDA just approved their fast result test kit with results in hours rather than days, should see a bump come Monday morning. AYTU BioScience (OTCMKTS: AYTU) and Todos Medical (OTCMKTS: TOMDF) both have a blood test with a 90% sensitivity than can be done between 2 to 10 minutes. Todos Medical has stated that its supplier can supply 300,000 test kits daily. The quicker these Chinese approved test kits get validated the more people that can be tested. They key is to pick the development team that can validate the test as quickly as possible. Based on the announcement Todos has a decisive lead in experience with Rao Mulpuri who is an expert in genomics and has commercialized a number of molecular diagnostics before.
MicroCaps: Solei Systems, Inc. subsidiary CareClix is a telehealth company trading under the ticker (OTCMKTS: SOLI), the CEO of its subsidiary, Dr John Korangy was interviewed by Fox News. Dr Korangy was invited to Fox and Friends as a guest expert on telemedicine and the global COVID-19 pandemic. Trxade Group (NASDAQ: MEDS) has a B2B trading platform with 11,900 registered pharmacies, licensed virtual Wholesale and Mail Order Pharmacy delivery capabilities using its DelivMeds app.
Another potential gem we found was Verity Corp. (OTCMKTS: VRTY) who recently merged with Home Solutions Health Inc., a medical service and device company focused on providing clinicians with state-of-the-art diagnostic and therapeutic tools (potentially ventilators), has yet to see any bump from the nation’s current situation. The company has added over 10 doctors to its board recently, a physician network in 20 states and 2 offices located in NY and Texas, stated it had over $80 million in assets in a shareholder letter, yet according to OTCMarkets, has a market cap of only $382k. We reached out for more info on the company and was told to look for a name change and filings in the near future. Patient Access Solutions (OTCMKTS: PASO) PASHealth Web Portal System also offers Health Care Solutions.
People need to eat and drink, a simple human need. You’d have to be living under a rock to not notice the bare shelves in supermarkets or have heard about customers brawling over toilet paper. Even though there are fears of going “out” into the world, homedelivery of groceries and local supermarkets are seeing a major “bump” in sales.
The big E-tailer and Supermarkets: Walmart (NYSE: WMT) will always have low prices and offers both online and brick and mortar stores. Along with Amazon (NASDAQ: AMZN) whom are the biggest retailers in the game, these companies are safe bets as they are never going away, and their business may see slowdowns due to a decreased workforce will thrive in these times. Supermarket giant Kroger (NYSE: KR) and Costco Wholesale (NASDAQ: COST) are seeing a burst of sales due to people hoarding and stocking up on necessities.
Food Delivery: Waitr Holdings (NASDAQ: WTRH) and Blue Apron (NYSE: APRN) should see a significance increase in food delivery sales during these times. GrubHub Inc. (NYSE: GRUB) an American online and mobile prepared food ordering and delivery marketplace that connects diners with local takeout restaurants will do well as long as there are chains willing to stay open to cook. Competitor DoorDash has filed for its IPO in February and is yet to trade publicly. Uber (NASDAQ: UBER) also made overtures to local businesses during these tough times by waiving their delivery fee with their food not finances campaign. Dominos (NYSE: DPZ) just announced a massive hiring of 100,000 people to meet the delivery demand.
If we are going to be “stuck” inside our homes for weeks or months, then people will grow bored quickly and need things to keep our minds and bodies occupied.
Streaming companies should see a greater increase in usage as people will be indoors. Netflix (NASDAQ: NFLX) and Amazon Prime (NASDAQ: AMZN), Disney (NYSE: DIS) and Apple (NASDAQ: AAPL) are the obvious leaders in this area, although Disney’s theme park division numbers will be dreadful. Apple’s iTunes store should be busy with apps, music and movie downloads should be strong, although their brick and mortar store sales will way down.
Children and young adults will be playing their video games such as Microsoft’s (NASDAQ: MSFT) XBOX and Sony’s (NYSE: SNE) Play Station systems and Activision (NASDAQ: ATVI). For the people who enjoy reading, downloads of books from Amazon for their Kindle, one’s tablet, phone or device will also rise in demand.
Going with the herd ensures average returns. The only way to outperform the market is to go after plays that the market has inefficiently priced. This is where investment in small capitalizations companies can result in extraordinary returns. This coronavirus economy is no different from the marijuana boom experienced just last year. Great wealth was created in the sector leaders but the extraordinary gains came in the small overlooked companies with real business strategies. Diversification within the sector is also driving investment to these smaller capitalization companies.
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Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.