Investing Strategies Amid Ongoing Coronavirus Outbreak

Written by: Jayson Derrick
February 10, 2020
  • Notable Wall Street bull Ed Yadeni said the coronavirus could result in a stock market correction.
  • However, he said investors should have "spare cash" ready to invest when there is more clarity.
  • Two pros agree Gilead is an attractive coronavirus-related pick.

The coronavirus is showing no signs of slowing down but investors appear to be unfazed. Despite a growing casualty list and new cases of the virus popping up worldwide, U.S. stocks were mostly higher Monday.

So should investors continue holding an uber-bullish stance? According to notable Wall Street bull Ed Yardeni, the answer is not necessarily.

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The Only Threat To The Market

Yardeni said on a recent CNBC “Trading Nation” segment the coronavirus is by default the biggest market threat as it happens to be the only market threat. In fact, the global economy was showing signs of uptick prior to the virus spreading across the world. Interest rates remain “so extraordinarily low” and central banks across the world are flashing “lots of reasons to buy” stocks.

Meanwhile, some of the headlines are quite worrisome, including an entire cruise ship being quarantined and blocked from entering the land. Also, entire cities in China are empty and this is clearly a disruptive force for global supply chains.

But the longer the virus remains front-and-center in the news, the bigger of a threat it poses to the global economy, he said. At the very least, the outbreak could result in a correction of at least 10% from recent highs.

“If I’ve got some spare cash, I’d like to just keep it as dry powder until I get a little bit more clarity on this coronavirus,” Yardeni said.

Biotech Idea

One of the more visible coronavirus-themed plays in the market is Gilead which broke out last week to trade at multi-week highs, Mark Newton of Newton Advisors said during a separate “Trading Nation” segment. Also, the biotech company’s call interest in the options market rose more than 80%.

China started testing one of Gilead’s antiviral drugs among coronavirus patients last week and the company could be in play as a takeover target, he said.

“An interesting technical risk-reward long for me, I like Gilead and I would own it and look to buy any weakness,” he said.

Quint Tatro of Jule Financial added to the conversation that Gilead’s stock is trading at merely 11 times forward earnings and backed by an impressive earnings growth profile and more than $6 per share of free cash flow — and a 4% dividend. Besides these encouraging metrics, the company should see a “boost” from the coronavirus.

“From a valuation standpoint, we like this stock quite a bit,” he said.