After all the hysteria about Ebola in America, it appears that the media might be coming to its senses. And most importantly, after a handful of Ebola stocks tacked on massive gains, it seems that investors are coming to their senses, too.
Reports from the World Health Organization that Senegal and Nigeria are both free of the virus have shown that the world isn’t ending after all. And while talk of a worldwide epidemic had temporarily lifted Ebola stocks that make protective gear or drugs to fight the virus, the reality of these wins in the war against Ebola has made those speculative investments look far less appealing.
As a result, some Ebola stocks are seeing major pain right now.
But should investors sell out? Or are any of these stocks worth hanging on to for a bit longer? Let’s take a look at 5 Ebola stocks making big moves lately and see for ourselves.
Ebola Stocks: iBio (IBIO)
YTD Return: +475%
Decline From October High: 40%
iBio Inc (IBIO) has been in a world of hurt since the momentum of Ebola stocks suddenly turned for the worse. The microcap biotechnology company focuses on vaccine enhancements, and after iBio offered to help the U.S. government produce Ebola treatments, the speculators on Wall Street went wild.
But now that Ebola hysteria has faded, the chance of a mammoth influx of government money appears to be unlikely … and iBio is giving its gains back just as fast as it made them.
Still, this Ebola stock is up five-fold since January, so longer-term investors still are sitting on a very nice return.
The bottom line is that iBio trades for just under $2 a share and has a market cap of just $130 million or so right now. This is way too small an issue to be in most portfolios, and will be highly volatile as a result of its size. Tread lightly here even if you want to sell, perhaps moving out of your position in multiple transactions of smaller lots. These kind of microcaps can move fast, so protect yourself.
Remember, iBio is unprofitable and records miniscule revenue. This is a sentiment-driven trade above all else, and as Ebola stocks continue to crumble, it could be bad news for IBIO stock.
Ebola Stocks: Lakeland Industries (LAKE)
YTD Return: +162%
Decline From October High: -50%
Lakeland Industries (LAKE) is another one of those companies that went on a tear in mid-October but now has crashed after the Ebola stocks craze dried up. Lakeland specializes in biohazard gear, including the special protective clothing used by medical professionals when dealing with infectious diseases.
As InvestorPlace writer John Divine put it on Oct. 14, “LAKE stock is a short-term, speculative Ebola play. Nothing more.” Or more pointedly, “you’d be worthy of another type of specialized protective clothing — a straitjacket — if you think LAKE stock is a buy at current valuations.”
That message was timely, coming just a day or so after Lakeland stock touched its highest mark since 2004 … and subsequently gave up about 30%.
As with iBio, it’s important to note the speculative nature of LAKE stock. This pick has a market cap of just $80 million, so it’s even smaller and more volatile. However, the company has had profitable quarters in the past.
Whether that adds up to an endorsement is up to you, but remember this Ebola stock is another sentiment-driven name that is very small and very volatile.
Ebola Stocks: NewLink Genetics (NLNK)
YTD Return: +70%
Decline From October High: Shares actually continue to set new highs
NewLink Genetics (NLNK) is an oddball among these other Ebola stocks. NLNK recently began clinical trials of its Ebola treatment, but like the other stocks on this list, it has a good chance of being fast tracked if studies prove encouraging.
This is an established player on the Nasdaq, with a nearly $1 billion market cap. And unlike some of these other speculative Ebola stocks, NewLink is actually trading higher now that the hysteria is fading than it was earlier in the month.
Of all the Ebola stocks on this list, NewLink may be the strongest … in large part because of its legitimate business outside any Ebola buzz.
Ebola Stocks: BioCryst Pharmaceuticals (BCRX)
BioCryst Pharmaceuticals (BCRX) is unlike these other speculative companies in that it has a legit biotechnology business that existed well before all the speculation about Ebola stocks brought it more attention. The theory was that BioCryst, which specializes in blocking the enzymes of many diseases, could pitch in to fight this deadly virus if an epidemic came to pass. There were even reports a few weeks ago that it was researching an Ebola drug.
But while the epidemic fears appear unfounded, BioCryst isn’t a one-trick pony like other Ebola stocks out there. Analyst Vernon Bernardino recently put a $15 price target on this stock, thanks in part to a “very promising pipeline” that features an orphan drug for edema. Orphan drugs are treatments that target diseases without a lot of good options for patients, and thus treated with special consideration from the U.S. Food and Drug Administration.
And, of course, if effective, these orphan drugs have a virtual monopoly on the market because of a lack of other treatment options in the space. So while some of the diseases these drugs target are very specialized and a bit uncommon, the profit margins are very nice for a company like BioCryst as a result.
Long-term, BCRX stock has been quite volatile. In fact, the stock suffered mightily in late 2012 and early 2013 after trouble with some prospective drugs, including hepatitis and influenza treatments. But since then, BioCryst has fought back in a big way and recently pushed through its 2009 highs.
Still, the company is not yet profitable and is a highly risky play. The Ebola buzz has faded, and now an investment in BCRX is dependent on its product pipeline and FDA approvals, like any development-stage biotech.
Ebola Stocks: Tekmira Pharmaceuticals (TKMR)
The company is over $400 million in market value, too, making it four or five times larger than some of the smaller players in this group.
Still, expect volatility in this Ebola stock; TKMR has been swinging by double digits on recent Ebola outbreak news, and most of those moves lately have been to the downside.
Tekmira is running at a loss as it continues to research “RNA interference therapeutics” — or treatments that prevent cells or germs from reproducing. It’s most promising pipeline of drugs relates to helping patients fight cancer.
As with all development-stage biotechs, you are taking a big risk on this small and unprofitable player. The good news is that Tekmira has an established business outside of the Ebola hype … but the bad news is that many similar biotech companies can run into big trouble after a few bad FDA trials. So tread lightly if you decide to stick with TKMR stock.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at email@example.com or follow him on Twitter via @JeffReevesIP.