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Coronavirus Stocks: Protecting Your Money From the Sell-Off

Written by Samuel Taube
Posted March 1, 2020

A few months ago, if you had asked the Wealth Daily team what would trigger the next market downturn, we would have given you a variety of answers — the U.S.-China trade war, erratic monetary policy, something like that.

None of us could have predicted that a new, rapidly spreading respiratory virus from China would cause the next crash.

coronavirus stocks, 1

But as you can see above, the Dow and the S&P 500 have shed almost 10% in a matter of days due to fears of the economic impact of the coronavirus outbreak. It just goes to show that the "black swan" events that cause large sell-offs are often completely unpredictable.

And this sell-off appears to be justified. The coronavirus, which didn’t exist a few months ago, has infected almost 100,000 people around the world and killed almost 3,000. It has brought China, the world’s most populous country and largest economy by some metrics, to a standstill. 

And public health experts believe that the outbreak is still in its early stages. That means the sell-off might still be in its early stages, too.

With all of this in mind, today we’re looking at some bright spots in the market: the “coronavirus stocks” that will allow you to keep growing your money while the current crisis plays out. 

Big Tech

It stands to reason the stocks that will be least affected by the coronavirus outbreak are those with the least exposure to China. 

And it’s hard to think of a better example of a set of China-free stocks than Big Tech.

Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOG) are both shut out of the Chinese market already; citizens of the country use homegrown alternatives like 21Vianet and Baidu, respectively. 

These two stocks have not necessarily been winners for the last couple of years. In fact, they’ve been under heavy selling pressure amid regulatory scrutiny. 

But this selling pressure has brought down their valuations to more comfortable levels. As you can see, neither of these stocks has posted losses during the recent coronavirus outbreak, and they’ve both handily outperformed the S&P 500. 

That’s partially because they’re not exposed to coronavirus-related risks, but it’s also because they’re just compelling companies in their own right. Both have posted below average price-to-book ratios and double-digit earnings growth in the last year.

coronavirus stocks, 2These two stocks should serve as relative safe havens from coronavirus-related selling. But there are other coronavirus stocks that could actually benefit from the crisis...

Consumer Staples      

The coronavirus outbreak may not have reached pandemic status yet, but it has worried consumers around the world enough to spark frenzied runs to pharmacies, department stores, and grocery stores.

Here in the U.S., where there have only been a few dozen confirmed cases, retailers are running out of surgical masks, hand sanitizer, and other disease prevention supplies. 

That’s bad news for the population, but it’s very good news for the consumer staples companies that make these products.

coronavirus stocks, 3

As you can see above, Clorox (NYSE: CLX) and Johnson & Johnson (NYSE: JNJ) have both posted positive returns since the start of the coronavirus outbreak. In fact, Clorox’s growth has only accelerated as the rest of the market has sold off.  

These two companies also have comfortably low valuations and strong earnings growth; they’d be worth considering even if they weren’t being boosted by coronavirus fears.  

And there’s another type of coronavirus stock that provides an even more direct play on the crisis… 

Biotech Stocks

One of the scariest things about this virus is the fact that it was completely unknown to science before December of last year. There’s no vaccine and no medication protocol for it. 

But a number of publicly traded U.S. biotech companies are working on developing vaccines and treatments. Those that have made headway have seen substantial jumps in their share prices. 

RNA-focused drugmaker Moderna (NASDAQ: MRNA) saw its price spike by roughly 50% in a single day after it announced that it had submitted a coronavirus vaccine candidate to the National Institutes of Health for clinical trials. 

coronavirus stocks, 4

Does that mean you should buy Moderna? 

Probably not. The good news about its coronavirus vaccine is priced in by now. In fact, you can see a slight pullback in the graph above. 

The next big coronavirus-related gains from the biotech sector will be made by a company that is currently developing a novel treatment or vaccine and hasn’t submitted it to the authorities for testing yet. 

Problem is, unless you have a network of doctors and biotech industry experts working for you, it’s nigh-impossible to monitor all the goings-on of small, early-stage biotech companies that are developing these sorts of experimental products. 

But Topline Trader editor Jason Stutman has solved that problem for you. He has a massive professional network in the biotech industry that apprises him of every major investment catalyst in the early-stage biotech industry, and he shares those catalysts with subscribers, helping them earn massive gains. Click here to learn more

Until next time,

Monica Savaglia

Samuel Taube

Samuel Taube brings years of experience researching ETFs, cryptocurrencies, muni bonds, value stocks, and more to Wealth Daily. He has been writing for investment newsletters since 2013 and has penned articles accurately predicting financial market reactions to Brexit, the election of Donald Trump, and more. Samuel holds a degree in economics from the University of Maryland, and his investment approach focuses on finding undervalued assets at every point in the business cycle and then reaping big returns when they recover. To learn more about Samuel, click here.

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