Swine Flu Stocks and the Economic Crisis
Thursday, May 7, 2009 | Bob De DeaNow, before some of you give me a hard time for even entertaining such a thought, know that I'm only half-serious. I was curious enough to do some investigating, and so today I present to you, with tongue firmly planted in cheek, a couple of investment opportunities that could possibly provide some short-term upside.
(Keep reading; there's also a lesson to be learned.)
When Pigs Fly ...
To start off, with the outbreak of A(H1N1) -- the fancy-schmancy name for the swine flu -- I'm sure you've seen pictures of people wearing respiratory masks, or even actual people wearing masks. (My wife and I visited a clinic this week and we were met by two nurses in masks outside the doors, surveying those entering the building.) I've also heard and read that the ubiquitous blue cloth masks are not as effective as the spun-bonded polypropylene masks available.
Now a French maker of protective equipment, including breathing masks, is poised to cash in on the flu. This from Reuters (Tuesday, May 5, 2009):
Sperian Protection could quadruple production of its protective face masks if swine flu prompts governments to make
bulk orders, its chief executive told Reuters in an interview on Monday.
The world leader in respiratory protection equipment has seen demand for its products jump since the outbreak of
the deadly new flu strain in Mexico last month and expects orders to remain high in 2009.
Sperian, formerly known as Bacou-Dalloz, has plants in Brazil, Tunisia and France and produces about 500,000 disposable
masks a day. It is ready to increase that by up to half in the coming days, its chief executive said.
"Demand will certainly stay high this year, as this crisis will prompt health authorities over the world to rethink their response to pandemics," he said, adding that the group had been contacted by several governments in Europe and North America.
Shares in Sperian jumped about 36.5 percent last week, but were down 10.9 percent on Monday at 34 euros, giving the
company a market value of 292 million euros ($387.9 million).
Here's a picture of the disposable "Freedom Mask" that Sperian Protection is marketing (even more effective than polypropylene):
Sperian trades under ticker "SPR" in the French stock market and is on the SBF 120 and Euronext's Eurolist.
Then again, The New York Times reported Monday that "The strain of swine flu circulating now does not appear to be nearly as dangerous as was initially feared, so measures to control its spread should be no more severe than those used to control the usual seasonal influenzas."
And, considering the company's admission that disposable masks represent a thin slice of their sales, the savvy investor's hope to make a quick buck might just be pig in the sty -- er, I mean "pie in the sky."
I Didn't Get to Sleep at All Last Night!
If you've got money in an IRA or a 401(k) or a trading account, chances are you've seen your holdings decline in recent months. You may have considered bankruptcy or the witness protection program or, maybe, less drastically, you may have lost a few nights' sleep over the economic mess.
You're not alone.
Over the four weeks ending March 22, the sales of Advil PM jumped 16% compared to the same four weeks from last year. The public is apparently willing to pay for help in reclaiming hours spent listening to the "Worry Ghost" perched on its shoulder, whispering in its ear.
And why not? Putting that voice to rest takes us out of this world for six, seven or eight hours at a time and places us squarely in a field of dreams.
Of course, our dreams may be anxious ones, but no pill can help that.
Who makes Advil PM? None other than the pharmaceutical giant Wyeth (Consumer Health Care division), which at the end of April announced that, although "net revenue decreased 6% for the 2009 first quarter, as compared with the 2008 first quarter," it actually "increased 2%, excluding the impact of foreign exchange" (according to its Web site).
There's an additional twist to this one, though: Wyeth is pending acquisition by Pfizer (for a measly $68 billion). Those of you who think a merger candidate makes a worthwhile investment might consider this pick. Or not.
The Lesson Behind This Article
I've tried to demonstrate in this flight of fancy that, as investors, it can be helpful to view things in a different light. Here's an example from my own experience of how a national company caters to the local crowd:
"No hurry," I said. "I'd like to send it the cheapest way."
It was a light package, containing a no-longer-needed VoIP modem -- a few ounces at most.
"It's $9.55 for UPS ground or $8.50 for USPS Priority Mail."
Did I mention it was a light package?
"You're kidding," I replied. "How much would it be to send it First Class mail? I'm in no hurry for it to get there," I reminded.
The clerk took it over to the USPS scale, weighed it, and said, "It's $3.25."
"Let's do that, then," I intoned.
What I deduced from this encounter is that the "cheapest way" is actually "the highest price I can get you to pay." I understand that this is a sales technique and I don't blame the guy for trying. (I dabble in retail myself.) But whether or not all UPS Store employees are trained in this tactic, when I am looking for the least expensive option, that's what I expect to be offered.
From now on, I'll head to the post office and won't set foot in a UPS Store ever again.
Teeka and Chris and Ethan all have, at one time or another, written about topics like customer service and how it's important to a company's bottom line, or about natural disasters or new discoveries that will make an impact on a sector. What's happening in your local Apple store or AutoZone right now, or in Pakistan, can influence short-term (and sometimes long-term) trends in specific industries.
(Aside: I heard a journalist say on the air that "Pakistan's pants are on fire." Hmmm. Ten points to the reader who can come up with a witty response for a profitable investment in something Pakistani.)
I'm not suggesting that the earth is here for our profit. Quite the contrary -- seeing the world in terms of investment opportunities is morally suspect. I believe that we should, in our very short stay upon this planet, try to make a difference in this world. But there's no harm in thinking outside of the rectangle, in seeing things for what they are, and in examining possiblities based on current events.
Then let our conscience guide us from there.
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Bob De Dea
Guest Contributor
The Tycoon Report
