Unlike other articles I’ve written for InvestorPlace, I’ve got to start this one with a series of caveats. While the theme here is about taking profits off publicly traded companies that have soared on the novel coronavirus narrative, you must realize that the Covid-19 crisis is a dynamic one. Therefore, I’d take this list of Covid stocks to sell with a huge grain of salt.
This relates to my other point. I’m not an epidemiologist and therefore I have zero expertise on how this crisis will play out. Based on mainstream media reports, some days, it seems like we’re making progress. On other days, developments with the SARS-CoV-2 virus itself, combined with other disconcerting social elements, suggest that we shouldn’t just be looking at Covid stocks to sell but adopting a protective stance across our portfolio.
Finally, I will note that we don’t know what to make of new strains of the coronavirus. For instance, according to a report from the New England Journal of Medicine, the Oxford University and AstraZeneca (NASDAQ:AZN) vaccine was ineffective against mild-to-moderate infections of the South African mutation, known as the B.1.351 variant. This is a recent news item so don’t know how it will impact Covid stocks down the line.
Americans should be concerned about these new strains. According to a Wall Street Journal article – hardly a source of sensationalism – the U.K. strain may account for 25% to 30% of U.S. cases. Obviously, the last thing we need is another surge of infections. But if that happens, these Covid stocks to sell could again find themselves enjoying a massive tailwind.
At the same time, cases could continue to decline. Based on the latest information from the Centers for Disease Control and Prevention, domestic cases are pointing in the right direction, as in down. Plus, President Joe Biden struck an optimistic tone regarding a pathway toward reopening society. If so, you may want to at least consider lessening your exposure to these formerly high-flying Covid stocks:
- Moderna (NASDAQ:MRNA)
- Novavax (NASDAQ:NVAX)
- Sorrento Therapeutics (NASDAQ:SRNE)
- Peloton (NASDAQ:PTON)
- Docusign (NASDAQ:DOCU)
- Alpha Pro Tech (NYSEAMERICAN:APT)
- iBio (NYSEAMERICAN:IBIO)
One last note before we dive into the individual Covid stocks to sell. I find it interesting that many of the hysterical accusations about the Biden administration – that he’s going to impose mass vaccinations on everyone and that he’s going to turn the U.S. into the U.S.S.R. – haven’t panned out. This might be a loose sign that we’re nearing the end of the health portion of this crisis.
Covid Stocks: Moderna (MRNA)
One of the headline generators in the war against the coronavirus, Moderna, along with Pfizer (NYSE:PFE), developed a messenger-RNA-based vaccine. This approach has a significant advantage in that mRNA vaccines are easier to cook up in the laboratory. Therefore, it wasn’t too surprising for experts that these two firms launched their long-term solutions before their rivals.
As you might guess, MRNA stock benefitted handsomely from the sudden need for a quickfire solution. Over the trailing year, shares have gained over 367%. And in the year-to-date, MRNA is up 32%. However, all good things have to come to an end. Given the encouraging vaccine rollout and declining infection rates, Moderna could be one of the Covid stocks to sell.
Of course, I want to be careful because of the changing nature of this crisis. For instance, recent reports indicate that the South African strain presents challenges to Moderna’s and Pfizer’s mRNA vaccine. A resurgence could mean a back-to-the-drawing-board catalyst for MRNA stock. But if that doesn’t happen, MRNA risks some volatility ahead.
One of the most promising Covid stocks, Novavax researched and developed a vaccine which was different from the nucleic-acid approach of Moderna and Pfizer. Novavax elected to run with a subunit approach, which has a track record of success, underlining the hepatitis B vaccine.
As you might imagine, the disadvantage to subunits is that they take longer to manufacture than mRNA vaccines. Unfortunately, time was a luxury that pharmaceuticals could not afford. Also, subunits may be more expensive. At the same time, the proven nature of subunits offered confidence to the public. Sure enough, NVAX stock was a massive winner, up over 2,000% in the trailing year.
But with such fanfare and enthusiasm, I just wonder if other investors aren’t getting a little worried about NVAX stock. Technically, shares are performing well, moving above their 50-day moving average. But having gone up so high and with other vaccines dominating the market, NVAX seems risky.
I’m not suggesting that this is one of the Covid stocks to short. However, you may want to consider trimming some exposure.
Sorrento Therapeutics (SRNE)
An oncology specialist before the pandemic, Sorrento Therapeutics made a sharp pivot to the coronavirus, providing a full spectrum of solutions, ranging from testing kits to treatments to a vaccine. Personally, I’m not surprised that SRNE stock ginned up considerable interest during the crisis as CEO Henry Ji, along with being a man of science, knows how to market the heck out of his ventures.
Even now, SRNE stock is really killing it, having gained over 41% YTD. Presently, it’s in an interesting position, sandwiched between the 50 DMA at the top and the 200 DMA at the bottom. Where it goes from here is tricky considering that pharmaceutical trades are known for their wildness. Plus, you don’t want to go heavy handed with your analysis on Covid stocks due to the underlying dynamism.
Nevertheless, this may be a trimming opportunity for those who are already profitable on shares. With the significant progress that has been made against the virus and many afflicted nations seeing improvements as well, the upside opportunity may be limited.
Covid Stocks: Peloton (PTON)
Not all Covid stocks to sell involve pharmaceutical plays, as Peloton demonstrates. Over the trailing year, PTON stock jumped nearly 318%, representing strong demand for its underlying home-fitness equipment. Logically, during the worst of the crisis, several state governments mandated stay-at-home orders for non-essential activities. Sadly, this put gyms and other fitness centers in a bind but cynically boosted the narrative for Peloton.
Yes, those exercise bikes are expensive, but here’s the deal. The most-impacted demographics involved communities who worked high-contact businesses. On the other hand, wealthier workers often had white-collar jobs they could transfer to home via remote-operation platforms. Further, even if some Peloton customers weren’t affluent, the cost savings from the daily commute could be transferred over to home-exercise equipment, boosting the bullish case for PTON stock.
However, as society gradually reopens, this thesis doesn’t quite ring as resolutely as before. Around mid-February of this year, PTON slipped below its 50 DMA. It’s now barely trading above its 200 DMA, which suggests that investors are losing confidence.
Docusign finds itself in a similar situation to Peloton and other non-pharmaceutical Covid stocks to sell. Over the trailing year, DOCU stock is up more than 178%, reflecting the changing needs of our society. Don’t get me wrong – the e-signature/e-verification business has been booming due to the increasing digitalization of our economy. Therefore, DOCU would probably have enjoyed upside anyway.
I suspect, though, that the main contention would be if DOCU stock would have soared the way it did because of the coronavirus. After all, Docusign isn’t the only name in town that can provide e-verification services. Further, if the situation involving the pandemic continues to improve, Docusign would be one of the Covid stocks to jettison from your portfolio.
Mainly, this is because healthcare facilities won’t have as much of an urgent need to handle paperwork efficiently and cleanly through digital channels. To be sure, the paperwork backlog is a major problem. However, if coronavirus cases continue to decline, the matter becomes less of a life-or-death issue and more of an administrative one.
Alpha Pro Tech (APT)
You may want to consider Alpha Pro Tech as one of the Covid stocks to sell not necessarily because it’s a rough company but because its premium is no longer justified. For instance, since the beginning of January 2020, APT stock is up more than three-fold. However, over the trailing year, shares are down more than 12%.
That tells me that APT was a single narrative play. And that catalyzing angle came from personal protective equipment such as facemasks. Today, this storyline is much more complicated than it was back in February 2020.
At that time, millions of Americans were glued to the TV as they heard reports about a mysterious virus originating from Wuhan, China, spread across different parts of the world. Then, as the first cases started appearing in the U.S., many who had the foresight bought their PPE, along with the essentials. In that panic, APT stock soared.
Since then, Americans gradually became accustomed to the virus. Also, mask-burning demonstrations in some parts of the country reflect growing frustration toward mitigation protocols. That’s not going to be very helpful for a PPE company.
Covid-Stocks: iBio (IBIO)
At the start of 2020, iBio shares could be had for 31 cents. Despite the wild ebb and flow of IBIO stock, that places its return since then at more than 461%. But at one point in the summer of last year, the equity unit closed at $5.50, confirming the huge demand for any kind of long-term solution to address the coronavirus.
In the vaccine race, iBio offered an intriguing case because of its proprietary FastPharming system. Through it, the company was able to deliver – within a matter of weeks – two vaccine proposals, one based on a virus-like particle approach and the other a subunit. Undoubtedly, the science backing IBIO stock is above reproach. However, the issue has always been about going to market and justifying investor sentiment.
In this regard, IBIO came up short. That’s not to say that shares don’t have a chance for upside. Like the other pharmaceutical Covid stocks, a resurgence could mean game on again. Nevertheless, I believe investors who are already profitable may want to trim back their winnings due to the excellent progress in our battle against the coronavirus.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.