Like the 9/11 attack or the implosion of the global financial markets in 2008, we will not soon forget the devastation of the novel coronavirus pandemic. Initially, reports about a mysterious outbreak in Wuhan, China made for titillating though ultimately foreign headlines. But when Covid-19 become everyone’s new normal, the impact changed everything — including comparatively mundane dynamics such as finding stocks to buy.
Naturally, investors turned to the broader healthcare sector, particularly pharmaceutical and biotechnology firm. Through the development of treatments and vaccines, many hoped that science could overcome this dreadful curse on humanity. Of course, it must be said that humans are often our biggest scourge, with the Covid lockdowns bringing out the worst in us. This too incentivized investors to consider certain stocks to buy, such as the firearms industry.
But I would be grossly remiss not to mention the positives. Despite what many consider a poor handling of the crisis, the Trump administration deserves credit for launching Operation Warp Speed. In an unprecedented initiative, the White House helped marshal the full scientific resources of the U.S. And true to form, our nation did not disappoint. Therefore, the pandemic decidedly helped particular stocks more than others.
Unfortunately, perhaps the biggest irony of Covid is that the very success that individual biotech and pharmaceutical companies sought would eventually signal the end of the road. Many of these relevant stocks are tied to smaller companies, with some making big pivots to address the pandemic. But with coronavirus cases declining sharply, it might be game over.
Therefore, investors should start thinking about rotating out of once-popular pandemic trades. Right now, only a few pharmaceutical firms have the inside line to profit from Covid. Sadly, most of these other former stocks to buy may have already hit their peak.
- Inovio Pharmaceuticals (NASDAQ:INO)
- Novavax (NASDAQ:NVAX)
- Gilead Sciences (NASDAQ:GILD)
- Sorrento Therapeutics (NASDAQ:SRNE)
- Alpha Pro Tech (NYSEAMERICAN:APT)
- iBio (NYSEAMERICAN:IBIO)
- Quidel (NASDAQ:QDEL)
I don’t take this write-up lightly because these and so many other organizations strived to help their fellow man. Moreover, it was under the most trying of circumstances. But business is business — and it’s your money on the line. Thus, you may want to consider backing away from these once popular stocks to buy.
Former Popular Stocks to Buy: Inovio Pharmaceuticals (INO)
One of the hottest stocks to buy early in the Covid crisis, Inovio Pharmaceuticals sparked headlines when it claimed it produced a vaccine for the SARS-CoV-2 virus by simply accessing its genetic sequence rather than obtaining a live sample. Later, that led to accusations of misrepresentation and market manipulation, which Inovio vehemently denied.
Still, it’s fair to point out that INO stock benefitted handsomely during the hysteria from the pandemic. For instance, in late June of last year, INO shares closed above the $30 threshold, a remarkable turnaround considering that pre-pandemic, the equity unit was languishing below five bucks a pop.
However, like so many pandemic plays, INO is one of the former stocks to buy that has failed to capture the magic. In my opinion, much of this has to do with general hesitation about nucleic-acid vaccines, particularly those that utilize the DNA approach like Inovio.
Here’s the breakdown. Reuters claims that DNA-based vaccines do not integrate into the host cell genome. However, the scientific research indicates that no one can make a blanket statement about DNA vaccine safety.
Because at least some hesitation exists regarding the DNA-based approach, I believe INO may have already peaked.
With all the talk about nucleic-acid-based vaccines, we should note that the leaders of the pandemic response, Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA), also use a similar approach. Where they differ from Inovio is that they use messenger-RNA as opposed to DNA. What’s the difference, you ask?
Well, a report from the European Molecular Biology Organization states that “Once mRNAs enter the cytoplasm, they are translated, stored for later translation, or degraded. mRNAs that are initially translated may later be temporarily translationally repressed. All mRNAs are ultimately degraded at a defined rate.”
In other words, mRNA vaccines — while very much experimental — have a proven safety profile when it comes to host-genome integration. Basically, it doesn’t happen as mRNA’s translation of genetic codes occurs in the cytoplasm, not in the nucleus. Therefore, mRNA vaccines managed to pip Novavax, which in my view was the most compelling stocks to buy for the pandemic.
That’s because Novavax went with a subunit vaccine approach, which is a proven innovation. An example is the hepatitis B vaccine. Therefore, I felt that the public would be most comfortable with Novavax’s vaccine rather than the other experimental fare.
However, the speed with which mRNA vaccines proliferated may have been the Achilles’ heel of NVAX stock. Regrettably, I’d be cautious about this name moving forward.
Former Popular Stocks to Buy: Gilead Sciences (GILD)
As a long-term solution to a pandemic, whether we’re talking about Covid or some other dreadful virus, vaccines and mass inoculation represent the primary goal of international health agencies. However, vaccine development “is a long, complex process, often lasting 10-15 years and involving a combination of public and private involvement.”
So it’s really a testament to both American exceptionalism and the global community coming together to address this once-in-a-century pandemic in 10 to 15 months. But on a cynical level if you’re a shareholder of Gilead Sciences, humanity’s success against the coronavirus might mean less incentive to buy GILD stock.
Early in the pandemic, GILD was one of the stocks to buy. Realistically, even with the marshaling of available resources, a vaccine would still take a long time to develop. In the meantime, everyone needed a treatment. And Gilead Science’s remdesivir — which would eventually be renamed Veklury — was a viable solution. So viable, in fact, that the Food and Drug Administration approved it as the first treatment for Covid-19.
Unfortunately, that hasn’t really helped GILD stock. Sure, shares are up double digits on a year-to-date basis, but it has been a disappointing road. With coronavirus cases down and full vaccination rates up, Gilead as it relates to SARS-CoV-2 may have peaked a while ago.
Sorrento Therapeutics (SRNE)
One of the main reasons why people love to wager on biotech-related stocks to buy is the chance for incredible riches. Typically, the pre-clinical names in this sector are priced in the doldrums because they’re mostly narrative driven. But every now and then, narratives turn to commercially viable products, which then leads to a dramatic boom.
But the other side of the coin is that the speculative biotech arena is littered with failures. I’m not suggesting that Sorrento Therapeutics will join the dumpster fire of biotechs that simply didn’t pan out. Some very exciting prospects exist regarding its core oncology business. But this was a firm that pivoted hard to the pandemic. And I’m afraid this shift was probably ill-fated from the beginning.
I could be dead wrong about this but I don’t think any other biotech firm offered as many solutions to Covid-19 like Sorrento. Ranging from testing to therapeutics to vaccines, Sorrento did it all. It’s just that by the time it made clinical progress, Pfizer and company were already denting coronavirus cases.
Could the new variants of Covid spark another rally in SRNE stock? I suppose anything is possible. However, this is a big risk that only risk-tolerant speculators should consider.
Former Popular Stocks to Buy: Alpha Pro Tech (APT)
Back when the first cases of the coronavirus hit the U.S., millions of Americans saw the writing on the wall. In addition to hoarding toilet paper — for fear that Covid would increase bowel movements, I guess — many desperately looked for N95 masks. Naturally, this significantly boosted the profile of Alpha Pro Tech, a manufacturer of personal protective equipment (PPE).
What made APT stock more intriguing as a speculation trade is that the main manufacturers of N95 masks were wiped out. Further, contradictory guidance from health experts — masks don’t work, oh wait, they do! — basically skyrocketed APT shares. Even as a casual observer, it was fun to watch this single digit nobody jump to double-digit prices.
However, the enthusiasm for APT was not consistent. Therefore, among the stocks to buy that soared on the pandemic, Alpha Pro Tech was one of the choppiest. But eventually, a strong measure of predictability would return to APT. Unfortunately, it was in the downward direction.
As coronavirus cases declined sharply and as the vaccination rollout began in earnest, APT lost its status as one of the stocks to buy. Worse yet, the cultural shift that I was looking for didn’t happen. Americans hate masks and PPE. With that, I think you got to call it a day with Alpha Pro Tech.
Even during the worst of the pandemic, iBio always carried a speculative aura about it. Primarily, this was due to its equity unit becoming a literal penny stock since 2018. Outside of a few bursts of bullish momentum, IBIO seemed destined for the dumpster. Then, the Covid outbreak nailed us and suddenly, IBIO became one of the top stocks to buy for extreme speculators.
In the second half of July last year, IBIO stock briefly closed up above $6, which is remarkable on a percentage basis. Just prior to the devastation from SARS-CoV-2, IBIO’s average weekly price point languished around 30 cents or so. It was hardly the type of trading action that would generate confidence. But going from 30 cents to $6?
That’s a 20X return, which can most certainly change your life if you wagered enough.
But there’s always another side to the story. At time of writing, IBIO dropped 77% from its closing peak. This is extremely disappointing because the underlying company features strong innovative potential. Its FastPharming system uses plants to produce proteins, which can then be incorporated in vaccines and treatments.
However, iBio never had a chance to this system to the test. Likely, that ship has sailed, making this a risky venture.
Former Popular Stocks to Buy: Quidel (QDEL)
As a medical equipment company specializing in testing and diagnostics, Quidel already had a relevant business prior to the pandemic. While Covid has obviously dominated mainstream headlines, it’s not the only condition in the world. However, it’s also fair to say that the coronavirus supercharged Quidel to incredible prominence.
Throughout most of the first quarter of 2020, QDEL stock was steadily creeping higher, almost as if shareholders knew that the coronavirus would breach our borders. But in early April, the narrative really started to juice up QDEL as lockdown measures began in earnest. Suddenly, an equity unit that was always priced under $100 found itself for a brief moment closing above $300.
Fundamentally, the optimism made sense. With the SARS-CoV-2 virus spreading everywhere but without the benefit of a vaccine at the time, the best thing one could do was to test themselves and take preventative measures. Logically, QDEL stock enjoyed upside from this incentivized environment.
But now that we do have a vaccine — actually several of them — the Covid testing aspect of Quidel has declined sharply. Unless we have another massive resurgence of the virus, I don’t see QDEL bouncing back to its lofty heights.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.