I Hate to Be Right About This

A month ago, I warned that the coronavirus pandemic was getting worse, not better. Indeed, I warned that we were headed into the teeth of a “third wave” of infections.

I hate to be proven right about something like this. But the third wave is washing over us and new cases are starting to rise dangerously high. Rather than feeling helpless in the face of this, I recommend you take action to protect your portfolio and potentially profit.

Even if you sat on your hands for the last month, there is still time and there are still great investment opportunities.

Why do I say the pandemic is getting worse? Here’s the scoop …

•  John Hopkins University reported more than 60,000 new COVID-19 cases on Tuesday. That’s up from 58,387 a day before and the third straight day the number of newly reported cases has increased.

•  Importantly, the current infection rate is much higher than the 40,000 cases per day we were seeing a month ago when I first warned about a third wave.

•  The seven-day average of new coronavirus cases (58,397) has been higher than the 14-day average (53,970) for nearly three weeks. This tells us that not only is coronavirus spreading, it’s spreading faster.


 

•  We have a fifth of the world’s cases in the United States. More than 221,000 Americans have died of coronavirus. That’s 21,000 more than a month ago.

•  Waiting on a vaccine? Don’t hold your breath. Some trials have been delayed. Importantly, experts are now pushing back expectations for a vaccine, first from the end of the year to the first quarter of 2021. And now we’re seeing it pushed back even further to mid-2021. And by experts, I mean people like Soumya Swaminathan, chief scientist for the World Health Organization.

Even when a vaccine is created, it has to be manufactured in large quantities and distributed. That could take a while.

“Realistically speaking, probably the second half, the middle of 2021 — maybe the second quarter, the third quarter of 2021 — is when we can start seeing doses actually flowing into countries so that they can start to immunize their populations,” said Swaminathan in press reports.

How You Can Play It

When I wrote about this matter a month ago, I recommended three ETFs that are likely to ride this wave of infections. These are all stuffed with biotech stocks and, importantly, have plenty of liquidity. I’ve seen one ETF after another touted as leveraged to the pandemic. Only when you look under the hood, you see the volume in those funds are ghost towns.

The three funds I recommended are:

Fund No. 1. The SPDR S&P Biotech ETF (NYSE: XBI, Rated C). This fund tracks the S&P Biotechnology Select Industry Index and has more than 120 holdings. It probably has more than one potential winner from the race for a COVID-19 vaccine.

Fund No. 2. The Invesco DWA Healthcare Momentum ETF (Nasdaq: PTH, Rated C). This healthcare-focused ETF allocates 42.25% of its investments to biotech.

Fund No. 3. The iShares Nasdaq Biotechnology ETF (Nasdaq: IBB, Rated C). The fund tracks the Nasdaq Biotechnology Index and holds a bevy of big-name biotech names.

Let’s see how they did since my recommendation a month ago, benchmarked against the S&P 500 …


 

They were all doing much better for a while, but earlier this month, money rotated out of the group. That may be because we’ve heard squawking in Washington about a vaccine coming before the election.

That doesn’t seem likely. Meanwhile, both the XBI and PTH are outperforming the S&P 500. In fact, PTH is doing SIGNIFICANTLY better.

So, to me, one fund looks like a clear winner — for now, and for the future.

And with what we know about rising infection rates, the recent dip in prices for these funds sure looks like a buying opportunity.

To be sure, there are individual stocks that can do even better than these ETFs. We have a couple of those in Supercycle Investor right now. It all depends on your appetite for risk and reward, and how much research you want to do on individual stocks.

But one thing is clear: The tide of the pandemic is against us, and it is rising. You better get a boat to ride out this third wave.

All the best,

Sean

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Comments 2

  1. leslie October 28, 2020

    Good morning Sean:
    hope you are doing well.
    I have been with you a good several years.
    My problem is US securities and my currency is Canadian
    in other words I pay a hefty premium on every purchase.
    On another matter several years ago, Martin introduced me to ” HIVE ” trades on TSX
    They currently mining heavily Etherium and Bitcoin.
    The value of the stock has not reflected anywhere near what Martin projected.
    I am still holding a lot in my portfolio.
    I hope you can appreciate my position.
    Respectfully, Leslie.

    Reply

  2. Len October 22, 2020

    Sorry, your comments are over the top alarmist regarding the virus. “Cases” have been reduced to not much worse than contracting the flu for most segments of our population. It would seem the death rate would be a much better indicator of the status of the disease. It is the political commentary that is exaggerating the situation as to achieve a perceived benefit for one political party over the other. I expect more truth in reporting to magically appear in about two weeks. Equity markets will then rise or fall in unison depending on election results.

    Reply