Despite Last Weeks Historic Stock Market Rally, The All Clear Signal Isn’t In; Call To Arms For Biotech And Pharma Industry; How To Play Tech Stocks Amid The Chaos
Randall Forsyth has an article in this weekend’s/March 30, 2020 Barron’s, “Bear-Market Rally Doesn’t Mean Stocks Will Revive Quickly,” warning traders to remain nimble with respect to stocks. This week’s gains came sharply and swift in an historic fashion. Despite still being short peak virus here in the U.S., the DOW, S&P 500 and the NASDAQ “surged 21.3 percent (DOW) from Tuesday to Thursday — the largest three-day gain since 1931/The Great Depression,” Mr. Forsyth wrote. “To anyone who has been around for a market cycle or more, the pop was the very essence of a bear-market rally; and, such rallies are [historically] the most violent.” After Friday’s selloff, “the blue chips still ended their best week since 1938, with a gain of 12.8 percent,” he noted. For the full articles noted below go to this weekend’s Barron’s for the full background.
Legendary technician Louise Yamada wrote in an email to clients and Barron’s that a re-test of recent market lows is still a distinct possibility. The bounce “could be part and parcel of a bear market rally,” a common occurence Mr. Forsyth observed. Ms. Yamada added, “this market needs a lot of technical repair.” Even after the short/sharp bear market of 1987, it took “a year or more of stabilization for equities to heal,” she wrote.
With 3.2 million Americans applying for unemployment benefits last week; and the virus not having reached peak infection here in the U.S., “stocks could still head south toward their recent lows, or even tumble further,” Ben Levishon wrote in this weekend’s Barron’s. “Every time we see those [unemployment] numbers, the market will act like it is a suprise and go down,” said Peter Anderson, of Anderson Capital Management. We’ll find out if he is right next Friday/April 3, when the March job numbers are announced at 0830 EDT. If there is fear of a really big number/worse than expected, then traders are likely to sell NLT Thursday before the numbers come out. If Mr. Anderson is wrong and the market shrugs it off, it could mean that the majority of those who are invested in stocks have become numb to the bad news. My own view is that we’re in for more selling and a roller-coaster ride — so buckle up.
For traders like myself, this was a great week; and, we may be in a situation where you ‘sell the rips and buy the dips.’ That strategy paid off handsomly this week.
Call To Arms For Biotech And Pharma Industry
The title above comes from Josh Nathan-Kazis’s article in this weekend’s Barron’s. Mr. Karzis writes that “there are now 60 programs underway to develop a COVID-19 treatment; and, more than 40 bio-pharma compaines in the race to develop a vaccine, by both commercial and non-commercial” according to the Milken Institute.
“Among the COVID-19 research programs in progress, are a number of attempts to use messenger RNA , to make vaccines that train the body to defend against the virus,” Mr. Kazis wrote. “Bio-tech firm Moderna (MRNA) already has an mRNA vaccine in the clinic, BioNTECH (BNTX) is working with Pifzer (PTE), and a Chinese company on their own version, Translate Bio (TBIO) is developing one with Sanofi (SNI), and so is the private firm CureVac,” Mr. Kazis wrote.
“Therapies unde investigation include repurposed antivirals such as Gilead Sciences (GILD) remdesivir and AbbVie’s (ABBV) Kaletra,” Mr. Kazis wrote. “Other companies are working on antibody therapies, including Regeneron Pharmaceuticals (RGEN), and Vir Biotechnology (VIR), which is teaming up with Biogen (BIIB).”
How To Play Tech Stocks Amid The Chaos
Eric Savitz posted an article in this weekend’s Barron’s with the title above. The bear market selloff has left a lot of carnage in its wake and the tech sector was no exception. But, as traders and investors look past the virus when the economy begins to heal, the tech sector will be a key player. Naturally, investors and traders will buy early, before this occurs. So, what are some tech names that investors might want to consider?
The work from home movement will make the cloud space even more in demand. David Readerman, proprietor of Endurance Capital Partners, a San Francisco-based tech hedge fund “has zeroed in on the cloud sector,” Mr. Savitz wrote. Mr. Readerman likes “DocuSign (DOCU), a provider of digital software, and Zoom Video Communicartions (ZM), the video teleconferencing company that has been one of 2020s best stocks. Readerman “is also bullish on data center operators like Equinix (EQIX), and Digital Reality Trust (DLR). On the more speculative side, Mr. Readerman likes their smaller rivals CyrusOne (CONE), and CoreSite Reality (COR), which could be consolidation targets.”
Riich Greenfield, the co-founder of the research boutique, LightShed Partners “remains bullish on Netflix (NFLX), and Twitter (TWIT).”
Paul Meeks, portfolio manager for Independent Solutions Wealth Management , and manager of The Wireless Fund, a small tech mutual fund, “likes Amazon (AMZN), and Alibaba (BABA) and his ‘dream set’ of semiconductor stocks: Advanced Micro Devices (AMD), Lam Research (LCRX), Taiwan Semiconductor Manufacturing (TSM), Micron Technology (MU), and Applied Materials (AMAT), where he expects to go from zero to a big overweight,” Mr. Savitz wrote. “Meanwhile,” Mr. Savitz adds, “Meeks remains bullish on Virtu Financial (VIRT) , a New York-based tech-driven financial trading platform.”
Dan Niles, founder and manager of the Satori Fund, a tech-focused hedge fund, “remains generally bearish on the market; but, likes: Microsoft (MSFT) and Sony (SNE) who are releasing new video-game consoles this fall; and video gaming stocks Zynga (ZNGA), Take-Two Interactive Software (TTWO), and Electronic Arts (EA), along with China’s NetEase (NTES) and Tencent Holdings (700.Hong Kong).” Mr. Savitz wrote.
Other bets Mr. Niles has are: Amazon (AMZN), and work-at-home play, RingCentral (RING), a cloud-based communications provider,” Mr. Savitz wrote.
Craig Moffett, founder of the boutique MoffettNathanson the market’s most influential telecom and cable see,” Mr. Savitz wrote, likes: “Charter Communications (CHTR), and Altice USA (ATUS), and T-Mobile US (TMUS).”
Lots of food for thought. Make sure to do your own due diligence, and understand your risk tolerance and time horizon. Stay safe, and good luck. RCP, fortunascorner.com