A “black swan” event is a highly unusual, utterly unpredictable happening that throws everybody for a loop. As far as the stock market is concerned, black swans are almost always bad. For instance, 9/11 was a black swan. COVID-19 is a black swan, too…
The coronavirus, which did not exist a year ago, has now shut down much of the world economy. The stock market hates that sort of uncertainty, and so earlier this year there was a massive sell-off.
Fear drove the market down
March in particular showed really a scary drop. For instance, Shopify (NYSE:SHOP) shares dropped from $593 on Feb. 12 to $305 on March 18. To lose almost half your money in a month is scary.
In the weeks and months that followed, the market discovered that Shopify’s business is actually doing great during this crisis. Revenue was up, way up. When the market finally figured it out, Shopify zoomed up to over $1,000 a share. Indeed, many internet stocks are seeing a surge in their business during this health scare. Stocks like Twilio (NYSE:TWLO), Zoom (NASDAQ:ZM), and Datadog (NASDAQ:DDOG) have all doubled in six months.
|Internet Stock||Price on Jan. 2||Price on July 2||Gain|
Why is this happening in the middle of a quarantine? Humanity is fighting against COVID-19. We don’t like this stupid virus, and we want to beat it: “You’re not going to defeat me! I’ll move my business online.” The rise in internet stock prices reflects this resiliency.
Yet far bigger rewards are being made by those small-cap biotech companies that are pursuing a coronavirus vaccine. These tiny companies have declared war on COVID-19, and the market is cheering these stocks higher and higher.
|Biotech Stock||Price on Jan. 2||Price on July 2||Gain|
|Inovio Pharmaceuticals (NASDAQ:INO)||$3.39||$21.45||550%|
|Vir Biotechnology (NASDAQ:VIR)||$12.56||$40.32||220%|
|VBI Vaccines (NASDAQ:VBIV)||$1.41||$2.87||108%|
What is the surprising coronavirus stock?
It’s a biotech stock. Specifically, it’s a small-cap biotech company that specializes in vaccines. And it’s very surprising. It’s Novavax, in which I am an investor, and it has surprised me.
When I bought the stock, I knew it was super-cheap, and potentially had a magnificent upside because of the company’s flu vaccine. But of course I was surprised by COVID-19, and how Novavax’s stock took off when the company started pursuing a vaccine for the coronavirus.
It’s shocking that Novavax has had a 20-bagger, when the company’s COVID-19 vaccine isn’t even out of phase 1 trials yet. And we’re seeing similar market reactions across the biotech sector, in names from the table above — Vaxart, Altimmune, Inovio Pharmaceuticals, Vir Biotechnology, and VBI Vaccines. If you had invested $1,000 in each of those companies on Jan. 2, your $6,000 would now be worth over $59,000.
While sharp gains are always surprising, in retrospect they’re less so. These stocks have a lot in common. All six of these names are small-cap biotech companies, and all six of them specialize in vaccines.
Contrast this with Gilead Sciences (NASDAQ:GILD) and its COVID-19 drug, remdesivir. It’s a very promising treatment for patients who are severely ill from COVID-19, yet the market’s not excited at all about that news. Gilead is up 17% this year.
Understand that the number of patients who are severely ill from COVID-19 is a very small number of people. It’s far less than 1% of humanity. But the number of people who might be vaccinated is astronomical. You and I will be vaccinated. Perfectly healthy people will be vaccinated. Most of the world will be vaccinated.
Let’s put it this way — Novavax is talking about manufacturing 1 billion doses in 2021. If the company charges $1 a shot, the drug’s…
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