Corona Virus Update
“Widespread fear is your friend as an investor because it serves up bargain purchases"
- Warren Buffett
The Portfolio
The portfolio was up around +6.0% this year. After todays sells and buys we're up about +2.0%.
Our benchmark index, the S&P 500 is down -9.74% YTD.
If you're interested in the stock market, are looking for diversification or growth please feel free to connect me. I'm always available to talk, maybe provide some new ideas or to present to your group. clay@claybaker.com
What I'm doing today
I trimmed our position in Nabriva to raise some cash. This has nothing to do with my conviction in the company, we simply were overweight in the name and we need the cash to buy some of our other names at these lower prices.
Today I bought more shares of Amarin, I doubled our shares of Boeing, I added to Coherus, Chipotle Mexican Grill and started a new position in SolarEdge Technology.
Bought 100 AMRN @ $14.00
Bought 6 BA @ $270.00
Bought 25 CHRS @ $18.00
Bought 1 CMG @ $705
Bought 10 SEDG @ $117
What's Happening?
Fears over corona virus have triggered a sell-off. In addition hedge funds recently published their 13F filings and discovered they were in a very crowded trade of a handful of stocks. Hedge funds don't like to be in that position, so we saw extra selling to balance portfolios and take profits in the FANG stocks in particular. Yesterday we got news of a case of Corona Virus in Brazil and some panic selling started up again.
I want to remind my readers to focus on the percentage declines, not the point declines. As the market indexes get larger the points are really not very relevant, the percentage numbers are. While yesterday's sell-off was "The largest point decline in history", the percentage was actually a garden variety sell-off that we've seen many times in the past. The market is a forward looking pricing machine, all that's happening is a repricing of the market down to levels where investors will be able to value companies on their fundamentals. We flew a little too high, and now we're coming back down where we belong.
My friend Bret Jensen over at SeekingAlpha.com posted some interesting numbers.
2003: Sars, S&P fell ~ 13%, then 20% gains in 3 months.
2015: Zika, S&P fell ~ 13%, then 17.45% gains in 12 months.
2020: Covid-19, S&P has now declined 15.8%
Nobody can say for sure where the bottom in this sell-off is. I'm simply encouraging everyone to look at all the information we have and make calm decisions about how you allocate your money. We know from history that these events can have a great human toll, but are short lived. We have every reason to believe that this virus Covid-19 is serious, could get a lot worse, and has the potential to cause a significant slow down in the global economy because of the disruption to travel, supply chains and decrease people's willingness to go out to malls, restaurants and shops. The silver lining might be that these restrictions will create pent up demand for travel and shopping when all this passes.
The challenge with Covid-19 is that many cases are mild, making it harder to detect carriers. Some cases are even a-symptomatic, making a carrier a silent threat to everyone around them. It's human nature to allow our thinking to go to the darkest, scariest place when we're confronted with something we think is completely misunderstood. I'm seeing headlines that suggest Covid-19 is out of control, doctors don't know what to do, the government didn't prepare, they don't have enough test kits, the government is allowing people who are not infected to travel with those that aren't infected.
Can we please stop working so hard to find someone to blame.
To say that nothing is happening is patently false. To claim that our government, China and other governments are inept and failing at protecting us is simply false. To blame this virus on Trump, Xi, or some conspiracy to intentionally infect everyone is nonsense. Will mistakes be made? Yes. Will we succeed at conquering this disease? Yes.
A combination of public and private sector efforts are moving at a very rapid pace to contain the spread and ultimately create a vaccine. The truth of the matter is that there are many testing systems being used, and more in rapid development. Right now there is an 'all of the above' effort underway to use anything that might provide some benefit in detecting carriers , isolating them, and providing treatment.
The virus has been identified by its genomic makeup and given its variant name; that means we know what it is. There are existing drugs that could prove effective and others being rushed into testing right now; that means we have some idea of how to treat it. There are detection machines being shipped around the world right now that can detect Covid-19 from a swab.
Gilead (GILD) has announced the initiation of two Phase 3 clinical studies to evaluate the safety and efficacy of remdesivir in adults diagnosed with COVID-19 (novel coronavirus). These randomized, open-label, multicenter studies will enroll approximately 1,000 patients at medical centers primarily across Asian countries, as well as other countries globally with high numbers of diagnosed cases, beginning in March.
Moderna (MRNA) a clinical stage biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines to create a new generation of transformative medicines for patients today announced that it has released the first batch of mRNA-1273, the Company’s vaccine against the novel coronavirus, for human use. Vials of mRNA-1273 have been shipped to the National Institute of Allergy and Infectious Diseases (NIAID), a part of the National Institutes of Health (NIH) to be used in the planned Phase 1 study in the U.S.
T2Biosystems (TTOO) While not directly targeting Covid-19 T2Biosystems has important diagnostic equipment for detecting sepsis and other blood pathogens and also to determine the right antibiotic treatment for each individual patient. In September 2019, T2Biosystems announced hat it has been awarded a milestone-based contract of initial value of $6 million with a potential value of up to $69 million, if all contract options are exercised, from the Biomedical Advanced Research and Development Authority (BARDA), within the Office of the Assistant Secretary for Preparedness and Response (ASPR) at the U.S. Department of Health and Human Services’ (HHS).The contract will enable a significant expansion of the Company’s current portfolio of diagnostics for sepsis-causing pathogens and antibiotic-resistance genes, which are designed to improve patient outcomes and reduce the growing threat of antimicrobial resistance. This contract will fund development through U.S. Food & Drug Administration (FDA) submission of new direct-from-blood diagnostic panels that will be run on the T2Dx Instrument and the development of a next generation T2Dx Instrument:The first panel developed will be a direct-from-blood panel for detection of biothreat pathogens, including threats such as B. anthracis, F. tularensis, Burkholderia spp., Y. pestis, R. prowazekii, and toxin genes.The second panel is expected to cover 99% of all bloodborne bacterial infections by means of ≥36 reported results, which include pan-Gram positive and pan-Gram negative results (detecting >250 species), in addition to the bloodborne antibiotic resistant threats identified by the Centers for Disease Control and Prevention (CDC).Along with the new panels, the BARDA award supports the development of a next-generation high-throughput instrument.
Ascletis Pharma, a Chinese Pharma company has detailed early positive signs from treatment with a combination of the hepatitis C (HCV) medicine Ganovo (danoprevir) and the HIV med ritonavir.
Lancet: An article published yesterday in The Lancet on infectious disease describes how an Artificial Intelligence (AI) program was able to quickly identify a group of existing , approved drugs that may be effective at treating Covid-19; essentially they are anti-inflammatories. Both coronavirus disease 2019 (COVID-19) and severe acute respiratory syndrome (SARS) are characterised by an overexuberant inflammatory response and, for SARS, viral load is not correlated with the worsening of symptoms.1, 2 In our previous Correspondence to The Lancet,3 we described how BenevolentAI's proprietary artificial intelligence (AI)-derived knowledge graph,4queried by a suite of algorithms, enabled identification of a target and a potential therapeutic against SARS coronavirus 2 (SARS-CoV-2; the causative organism in COVID-19). We identified a group of approved drugs that could inhibit clathrin-mediated endocytosis and thereby inhibit viral infection of cells (appendix). The drug targets are members of the numb-associated kinase (NAK) family—including AAK1 and GAK—the inhibition of which has been shown to reduce viral infection in vitro.5, 6 Baricitinib was identified as a NAK inhibitor, with a particularly high affinity for AAK1, a pivotal regulator of clathrin-mediated endocytosis. We suggested that this drug could be of use in countering SARS-CoV-2 infections, subject to appropriate clinical testing.
Jack Ma, the founder of Alibaba, through his Jack Ma Foundation has awarded a $2.1m grant to four research teams at Columbia University to identify antiviral drugs and antibodies that can be used against the Covid-19 coronavirus.
The Bill and Melinda Gates Foundation is providing up to $100 million to improve detection, isolation and treatment efforts; protect at-risk populations in Africa and South Asia; and accelerate the development of vaccines, drugs and diagnostics.
Adding to Amarin (AMRN)
Amarin is down significantly, so I'm taking the opportunity to add to our position.
Adding to Facebook (FB)
Facebook has declined below $200, so I picked up some shares at our buy around price. While our position in Facebook is small, I did triple our position from 5 shares to 15. If we had more cash available I would have bought a lot more.
Started a new position in Generac (GNRC)
Alternative power maker Generac has been on my radar for a long time, but the stock just would't pull back. Even the corona virus outbreak wasn't slowing it down. I finally got a shot at the stock today when my limit order at $108 was triggered, $1 below my buy around price. I expect to hold Generac for a long time and will likely keep it as a core holding in future years. I'll be adding at any opportunity.
Today's BUYs
Amarin (AMRN): Bought 100 shares @ $16
This is an add to an existing holding.
We now hold 600 shares @ $18.33/share
Facebook (FB): Bought 10 shares @ $197
This is an add to an existing holding.
We now hold 15 shares @ $199.33/share
Generac (GNRC): Bought 50 shares @ $108
This is a new position
We now hold 50 shares @ $108/share
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcycles."
- Clay Baker
Stay Invested,
Clay Baker
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Keep Me Honest 2019
S&P 500 declines to 2,350 or more (1-3-2019)
Healthcare and Biotech sectors outperform (1-3-2019)
S&P reaches 3,000 by year end (1-11-2019)
CSCO reaches $60/share (1-18-2019)
VEEV reaches $145/share (2-14-2019) (achieved $145.23 on 5-10-2019)
CVS reaches $91.50 (2-27-2019)
Bull market takes another leg up (4-7-2019)
The Fed will lower rates 1-2 times (5-13-2019)
Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When a good stock you own drops 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Rule #7: When an investment bank sells below book value, buy it
Rule #8: Tips are for waiters. Do your own homework.
Rule #9: Don't sell a stock because you're bored with it. Do your own homework.
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
HD, AMRN, BSTC, CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL, NBRV, ENPH
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
