Your Week In Brief

BATs, Bats, and Dingbats.

Author: Gregory Bergman   

A few months back, when Covid-19 was just the "coronavirus" and a "snack" meant something less than an entire loaf of bread, I had written -- in the context of recommending Clorox as a stock -- of a curious debate amongst ambitious American do-it-yourself types as to whether or not injecting bleach or other disinfectants might be a good way to kill Covid-19. Well, it isn't. Strangely, after yesterday's White House press conference, this warrants repeating.

And the Lunatic Said Unto Them: Let There Be Light...

Trump, who is schooled in the art of the deal and apparently, infectious disease, mused Thursday about the possibility of killing Covid-19 through the use of ultraviolet light outside and, oddly, inside the body after Bill Bryan, who leads the Department of Homeland Security's science and technology division, pointed to research showing that Covid-19, as with many other viruses, dies quickest in sunlight.

"And then I said supposing you brought the light inside the body which you can do either through the skin or in some other way," explained Trump. "And I think you said you're going to test that too. Sounds interesting."

Yes, Mr. President. Very interesting. But not as interesting your next idea: "And then I see the disinfectant, where it knocks it out in a minute, one minute, and is there a way we can do something like that? By injection inside or almost a cleaning."

Anyway, back on planet Earth, Clorox (NYSE: CLX) rose 15% since my recommendation, hitting a high of over $198 per share. Considering its proven popularity as a cleaning product and its potential popularity as a homespun vaccine, I would add more Clorox to your portfolio — and your cupboard.

Buy BATs, Burn Bats

Chinese scientist Shi Zhengli, or "Batwoman," as she is called, warned the world for years in multiple languages – she is reportedly fluent in Mandarin, French, English, and sonar-- that this despicable flying mammal harbors coronaviruses that pose serious risks to human health. Of course, she was silenced and now we are all holding our breath—those of us that can breathe at all. This does beg the question: Do we really need bats? Can't we just exterminate them wholesale as some scientists now say we should do with the malaria-ridden mosquito? Mosquitos, it turns out, aren't as necessary to the ecosystem as you might think; they aren't bumblebees or anything. 

Scientists should take a serious look into just how necessary the bat is for a thriving ecosystem. A Batcave full of evidence suggests that SARS and MERS originated in the maniacal mammal, and it's now believed that SARS-CoV-2 --the initial name for Covid-19-- did as well. So, maybe it is time to say bye-bye to bats. With 99% of all organisms that have ever existed now extinct, a vicious bat-killing craze might be justified. And I'm not alone on this. In Peru, authorities stepped in to rescue 200 bats from being burned by torch-wielding, health-conscious peasants. And did the bats even say so much as a thank you? No, sir. And now: BATs.

Known as BAT stocks: Baidu, Alibaba, and Tencent have always been buys, and, in light of China's economy seemingly starting to reopen, they are worth another look at these prices. 

Baidu (Nasdaq: BIDU) trades at more than a 40% discount. With advertising contributing more than 70% of Baidu's total revenue, the company has been hard-hit as ad revenues have certainly fallen in the first quarter as the pandemic raged in the mainland. But the company is also active in the self-driving and ride-hailing space and is looking to further diversify. As the economy picks up, so too will those ad revenues. At about $100 per share currently, Baidu is down nearly 42% from its 52-week high. I'd buy it. 

Alibaba (NYSE: BABA) is a household name in the online retail space, the one Chinese company everyone in the United States has heard of. The stock has been rising and, while late to the party on this one, I would still pick it up at its current share price of $203, which is still down from its $223 pre-Covid peak. Alibaba will never become the global dominator it envisions; in my view, that's Amazon's destiny. Still, it will dominate a rapidly growing region for decades to come and with $56 billion in revenues (let's call it $50 billion in light of recently rampant Chinese company fraud), it is still the safest Sino-savvy bet long-term. 

Tencent (OTC: TCHEY), the "T" in the "BAT" and the Asian answer to Spotify, exited 2019 with 39.9 million music subscribers, though it has a long way to go before it catches Spotify, the industry leader. However, the company's subscriber base expanded by 47.8% in 2019. The company went public at $13 per share. Currently, the company trades at $11 per share. At this price, TME stock is trading at nearly a 40% discount to its 52-week high of about $18. Even if these companies never become as big as investors hope, BATs and bats – unless the Peruvian peasantry steps up their game — are both here to stay.

Rats, Not Remdesivir

The stock in Gilead (Nasdaq: GILD) slumped 4% Thursday afternoon on reports that its drug, a Covid-19 vaccine hopeful, had failed in a Chinese trial. This followed a report from the University of Chicago Medicine that a Phase 3 trial of Gilead Sciences' remdesivir showed "rapid recoveries" in patients with severe forms of coronavirus. At the time, shares in the California-based biotech jumped 13% to about $87 apiece. As of Thursday, however, GILD stock fell back down to $77.78 per share.

The Stat News reported that a Chinese study, which was "terminated prematurely" and "had too few patients" was posted on the World Health Organization website and was quickly taken down for closer review. Between the University of Chicago and a Chinese study, I have admittedly far more faith in the Chicago study than the one in China. With the stock up $1.50 as of midday Friday, investors agree. 

Either way, I still think that Regeneron, with its magic genetically-engineered mice, has the best chance at breaking a novel treatment for the novel coronavirus. I put out a buy recommendation on Regeneron (Nasdaq: REGN) at $470 per share; it just hit an all-time high of over $573 per share, an increase of over 21%. Also hitting an all-time high this week in the pharma field was Johnson & Johnson (NYSE: JNJ), which hit over $156 per share Thursday, up over 14% from my $136 buy price.

AOC? More Like GED

Oil had another unsurprisingly bad week, with the West Texas Intermediate futures actually turning negative for the first time ever on Monday, touching a low of minus $40.32 a barrel before closing at minus $37.63 a barrel. Yes, minus. How is that even possible?

With travel shut down, there is almost zero demand for fossil fuels, yet oil is still being extracted (shutting down wells is a big decision especially for smaller shale producers--they can't flip production on and off like a light switch, cheaply). With nowhere to go, the cost to store the oil was considered, albeit temporarily, more valuable than the commodity itself. This nightmare was eased when Trump used what experts called the "oldest oil trick in the book."  That is, he made threats about blowing up stuff in the Middle East. This would hurt supply, thus raising demand. It worked until it didn't, and oil is going to crash again. This, despite what Representative Alexandria Ocasio-Cortez aka AOC believes, is not a good thing and gets us no closer to the solar-powered future I agree we need.

When oil plummeted, AOC, who constantly points to her bewildering Economics degree, tweeted: "You absolutely love to see it... This along with record low-interest rates means it's the right time for a worker-led, mass investment in green infrastructure to save our planet."

Setting aside the tens of thousands of workers out of a job, (and the "you have to crack eggs to make an omelet" argument), AOC doesn't seem to understand the relationship between oil prices and green energy. When oil is cheap, renewable energy does not become cheaper or more attractive to consumers. If anything, it's the opposite. That said, we are in a strange situation in which demand is so low that there is a problem of too much supply—hence the negative oil future contracts. But demand is also down for renewable energy in this pandemic, and layoffs are occurring in massive numbers in the green energy industry as well. I heartily agree that one should "never waste a crisis" to push something at least broadly positive like renewable energy, but don't be an idiot while you do it.

Don't Tread on My Applebee's

As the week comes to a close, it is important to mark these last seven days as the beginning of the Second American Revolution. This will be forever known as the time when brave men and women stopped ordering from Amazon and playing video games and started courageously marching without masks in the name of freedom. They shout their slogan: "Open it Up" as they call to reopen the economy. Inspired by Trump's calls to "liberate" certain states from his very own guidelines, these people will no doubt go the way of the now non-existent "Tea-Party."  This "movement" will also die out—just a lot more quickly and in a lot more pain. Then again, I'm sure this Covid-19 business isn't anything that a little injection of Glass Plus can't solve. Just don't drink all the Lysol-- when your right-wing Supreme Court overturns Roe V. Wade, you're gonna need an effective abortifacient.


(The opinions expressed in this article do not reflect the position of CapitalWatch or its journalists. The analyst has no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only and does not constitute financial, legal, or investment advice.)

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