EXPERT: “The Right Way To Play The Vaccine Race”
If you’ve been following along for the past few weeks, then you know I’ve made it a point to periodically check in on one of my favorite indicators to judge the health of the market.
I’ve talked about the Advance/Decline Line (AD Line) a number of times before. As a quick refresher, this indicator tells us how many stocks are rising versus falling. If a market is rallying, we want to know if this rally is being promoted by only a handful of stocks. Ideally, we want to see strong market participation. This means a lot of stocks are pushing the market higher and that the rally is strong and healthy.
But if the market reaches new highs, while the breadth indicator doesn’t, that’s called a bearish divergence. This has historically led to a market pullback.
As you can see in the chart below, the AD line is hitting new highs, which tells us that this is a healthy bull market…
This is a good sign to be sure. And while I’m cautiously optimistic, we have to keep in mind a couple of key critical points that could have an impact on nearly all of our holdings.
The Big Picture
First, is the anticipated second Covid-19 stimulus package. One vital part of that package that many analysts will likely be keying in on is whether the government will extend the enhanced unemployment benefits that are set to expire on July 31.
So we need to keep that crucial legislation in mind and how it could impact our holdings.
We are also in the midst of the second-quarter earnings season. And as any investor can attest, earnings season can bring some heightened volatility. Sometimes good. Sometimes bad. During these important times, it’s important to pay extra close attention to your holdings. And if it comes to it, be prepared to make quick and immediate moves if the underlying thesis behind your investment begins to show signs of deterioration.
And finally, the third thing we need to watch out for is news of a potential viable therapeutic or vaccine against Covid-19.
Right now, there are a number of companies working on a vaccine. And the government is shelling out truckloads of cash (more than $10 billion so far) to pharmaceutical companies to help with research and development costs.
Of course, we all want to see a viable treatment for Covid-19. (A cure would be even better.) And any promising news on that front is good for the market. The same goes for the opposite.
I want to spend a little bit of time talking about that, because I know it’s an area of interest for a lot of investors, traders, and frankly, the public at large. I’ll even give you my two cents on how most investors should be approaching this space right now…
The Right Way To Play The Vaccine Race
As you can imagine, a lot of investors have been watching the vaccine race play out. And a lot of traders are speculating on which pharma company will be the first across the finish line.
One of the biggest beneficiaries of the coronavirus has to be Moderna (Nasdaq: MRNA). At this time last year, few people had ever heard of this company. And why would they? It was a small biotech company that hasn’t brought a drug to market. Shares traded for $13 a share.
Today, it’s a common name in the fight against Covid-19, and shares are now trading north of $80 – a one-year performance of 490%.
Of course, it’s still up in the air whether the company can pull through with a Covid-19 vaccine.
And while MRNA has attracted a ton of attention from individual investors, I’ll just say this… This unproven company has yet to produce a positive quarter of cash flow. Last year, it lost nearly half a billion in cash flow. And in its most recent quarter, cash flow came in at negative $121.4 million.
I don’t bring this up to specifically malign MRNA. Who knows? Maybe they’ll pull it out. But it could also be some other player. So if you’re thinking about putting a little bit of money to work in this space, here’s the thing you should keep in mind…
Action To Take
If you want to invest in a certain hot sector or trend, some of the biggest winners don’t always come from the obvious players in the space. Instead, it sometimes pays to look at the companies behind the scenes – the ones supplying said sector or company. The proverbial “picks and shovels” of the industry. And that’s exactly what we have with one of my recent picks over at Maximum Profit, for example.
You see, this pick is a company that supplies practically the entire pharma industry. And when you’re investing in a “picks and shovels” company, it doesn’t really matter which pharmaceutical company comes through with a vaccine or drug to combat the coronavirus, because the vast majority will be utilizing this company.
I can’t share the name of this pick with you today out of fairness to my paid subscribers. But if you’re thinking about speculating in this space, I’d encourage you to think again. Think about putting the odds in your favor with a pick that benefits no matter who wins the race.
That’s what my colleague Dr. Stephen Leeb has done in another corner of the market…
As many of you know, the race to deploy 5G technology is already happening. And the stakes are massive. Whoever wins this race will be responsible for not only enabling ultra-fast internet and data connections that will unleash a new wave of innovation – but also for lining the pockets of shareholders with massive paydays.
And Dr. Leeb and his team have identified one little-known company that will come out ahead no matter who wins the race. Want to learn more? Simply follow this link to check out his report right now…