Covid-19 Goes Endemic. Is Your Portfolio Ready?

When the coronavirus pandemic first hit the U.S. in 2020, I found myself at Home Depot (NYSE:HD) shopping for makeshift gym equipment. The mad rush for stay-at-home fitness gear had pushed prices of ordinary workout weights into the hundreds of dollars on the resale market, and I just refuse to pay a 5x premium for dumbbells when a metal pipe and two milk jugs would suffice.

And you know what else went up? The stock of Nautilus (NYSE:NLS), the near-bankrupt maker of modern-day torture devices such as the BowFlex XTreme 2 SE Home Gym and the E618 Elliptical. $10,000 invested in NLS during March 2020 would have ballooned to $230,000 in less than a year.

Today, we’re seeing a new shift: one where Covid-19 is becoming a ubiquitous aspect of everyday life.

Those who want to work from home will find a way — my colleagues who run a great options masterclass make it abundantly clear how easy it can be. And while few of us are ready to give up the luxuries of travel, eating out and socializing in general, the faster people realize Covid-19 won’t disappear any time soon, the sooner they can catch the next Nautilus Moonshot.

If being stuck at home is here to stay, we might as well get our portfolios ready.

Endemic Covid-19 Stocks

Love him or hate him (he’s a Yankees fan, after all…), everyone can agree that Dr. Anthony Fauci was right about one thing: Covid-19 is becoming an endemic disease.

To date, over 40% of Americans still haven’t gotten a Covid-19 jab, whether due to ineligibility, time constraints or personal beliefs. And as more than 700 breakthrough cases in Provincetown, MA, show, even fully vaccinated people can still catch and transmit the disease (though at much lower rates of transmission and mortality).

Yet the stock market has barely reacted to this new reality. Work-from-home companies like Zoom Communications (NASDAQ:ZM) are a third or more off their peaks. Meanwhile, end-of-lockdown stocks, such as office real estate company CBRE Group (NYSE:CBRE), are pushing all-time highs.

Something strange is clearly going on.

But I’m not here to argue about mask mandates or market irrationality. You probably know enough to write several books on the subject.

Instead, I’m going to take our reality as a given and revisit three of my favorite Moonshots that will benefit from helping people stuck at home.

3 Stuck-At-Home Stocks to Beat a Pandemic: Fulgent Genetics (FLGT)

If you think Covid-19 testing is here to stay, you aren’t alone. InvestorPlace’s Louis Navellier has long cautioned against over optimism for those who want things to go back to normal.

“If rising cases … are any indication, then COVID-19 isn’t going to disappear anytime soon,” wrote Mr. Navellier back in November. “Simply put, our Covid-19 plays shouldn’t show any signs of slowing momentum in the coming months.”

And he was right. Fast forward nine months, and the world is still struggling to contain multiple variants of a virus that’s plagued humankind for decades.

That’s why Fulgent Genetics (NASDAQ:FLGT) has stayed on my radar. This genetic testing company is one of the key players in Covid-19 testing — the firm delivered 3.8 million tests in Q1 2021. They’re also at the forefront for genetic sequencing tests — an essential tool for tracking new Covid-19 variants.

The company isn’t resting on its laurels either. In May, the firm poached Dr. Lawrence Weiss from NeoGenomics (NASDAQ:NEO), a far larger firm specializing in cancer-focused genetic testing. So even as Covid-19 testing eventually plateaus, Fulgent is a stock to keep in your back pocket.

FuboTV (FUBO)

Make no mistake — I like fuboTV’s (NYSE:FUBO) rival, Netflix (NASDAQ:NFLX). CEO Reed Hastings has done the near-impossible: turning a startup into a firm that even Disney (NYSE:DIS) fears.

But even Netflix has its limits. Want to watch the Olympics? Good luck finding it if you don’t have a cable connection. Or what about the upcoming NFL season? Same deal.

And given NFLX’s lofty valuation, it shouldn’t surprise frequent Moonshot readers that I favor the far-smaller fuboTV, a company with 10x potential.

The company reported stunning growth figures for Q1. Subscribers rose 7% in the quarter, almost four times faster than Netflix’s growth. And the longer Covid-19 goes on, the more likely people will continue to pile in.

That’s because fuboTV focuses on the lucrative market of live sports — an arena that cash cows ESPN and Fox Sports have dominated for years. Though other tech firms have tried to muscle in, fuboTV has been arguably the most successful in convincing sports watchers to cut the cord.

Harbor Custom Development (HCDI)

Ever since the 2008 financial crisis decimated the housing market, investors have collectively shied away from single-family housing. If the future of America was in big cities, they reasoned, why develop more suburban sprawl?

But the Covid-19 pandemic turned that logic on its head. Demand for single-family housing boomed in 2020, driven by renters looking to move out of densely packed cities. According to Freddie Mac, the U.S. now has a shortage of 3.8 million single-family homes.

As the coronavirus pandemic drags on, demand for suburban housing will continue to see further upside. And that means single-family homebuilders including Harbor Custom Development (NASDAQ:HCDI) will notch big wins.

So why choose HCDI above all others? The biggest reason is that it’s cheap. At around $3 per share, markets have priced the firm at just 0.36x price-to-sales.

To be fair, HCDI is so inexpensive for a reason: in order to maintain its breakneck 66% annual growth rate, the firm has dropped prices further than any other builder. Gross margins in 2020 were a stunningly low 4% — one-fifth of the industry’s average.

But as people begin realizing that Covid-19 and work-from-home could be here to stay, demand for single-family housing will continue to rise. And operationally-leveraged firms exposed to that trend — such as Moonshot bet HCDI — will be the ones to benefit.

Stocks Stuck In Reverse While We’re Sheltering At Home

Beyond the massive human toll, Covid-19 has also caused serious pain among firms reliant on in-person shopping. Washington Prime Group (NYSE:WPG), a shopping mall REIT (real estate investment trust) once beloved by Redditors, is bankrupt and circling the drain. And for every GameStop (NYSE:GME) breakout, many more mall retailers have shut down.

There’s one company, however, that I would like to highlight: Clover Health (NASDAQ:CLOV). That’s because this Reddit-fueled company is often mistaken for a Moonshot investment by retail investors.

Perhaps it’s because of SPAC superstar Chamath Palihapitiya’s involvement. Consider his earlier ventures:

• IPOA — Virgin Galactic (NYSE:SPCE), a space tourism company.
• IPOB — OpenDoor Technologies (NASDAQ:OPEN), an “Amazon (NASDAQ:AMZN) for houses.”

Then came IPOC, a $3.7 billion deal that took Clover Health public in 2020.

But Clover Health isn’t a tech-first firm. Despite its alphabetical proximity to Virgin Galactic and OpenDoor, Clover Health is a healthcare company offering Medicare Advantage plans. Its closest competitors are firms like Oscar (NYSE:OSCR) and UnitedHealth (NYSE:UNH)-owned Optum.

And if there’s one thing we know about health insurance, it’s that people won’t compromise on quality — especially not during a pandemic. Unless of course, there’s a massive price discount.

What’s Clover Health Worth?

Back in June, I cautioned investors against Clover Health, a firm that had gotten pumped more times than I can remember.

“Medicare Advantage is already a tricky business. It’s even harder when you’re accused of violating the Stark Law.”

Since then, prices have dropped another 30%. Investors would have saved themselves the heartache had they sold out on my recommendation.

Here’s the nitty-gritty that any successful insurance investor should know: regulators calculate Medicare Advantage star ratings by comparing health outcomes, a system that typically favors well-funded incumbents. A notable recent exception was Oscar Health, which managed to break the cycle in 2014 during a period of rising deductibles.

But today’s unending Covid-19 pandemic could give pause to those looking to switch to a lower-rated plan. And until people once again feel confident about doing so, Clover will find itself stuck gaining customers through questionable upsells and praying for another Reddit pump.

What Do People Think of Covid-19 Anyhow?

#6	America’s global rank by percent of population vaccinated as of March 2021.
#28	America’s global rank in vaccinations today, per data from the World Bank and The Economist.
56%	The number of American adults who believe employers should mandate vaccinations for employees and customers.
37%	The number of Americans who believe the government should quarantine those who have been exposed to Covid-19. That seriously lags Malaysia (78%), Singapore (77%) and Australia (70%), according to polls by YouGov.

Investing Into the Tech Revolution

Thinking of buying (or shorting) Robinhood (NASDAQ:HOOD)? Joanna Makris dives into the brokerage’s fundamentals and comes up with some great insights on what you need to do.

With U.S. stocks pushing record highs, are we in the ninth inning of the rally? Or is the ballgame just getting started? Louis Navellier writes on why you need to stay invested in an economy with plenty of “oomph” left.

Last month, I wrote about Eric Fry’s take on why the rich are getting richer. He’s followed up with a new piece on what investors can do about it.

And finally, Luke Lango takes a look at the fourth industrial revolution — 3D printing companies that could upend U.S. manufacturing once again.

Moonshots Under Your Nose

People looking back at 2020 might say, “It was obvious that home gym makers like Nautilus would win.” Or, “I knew airlines would nosedive in the midst of a worldwide pandemic.” Hindsight, as they say, is 20/20.

But that’s what makes investing so maddeningly easy. People are sometimes so focused on a future 5… 10… 20 years from now that they leave easy wins on the table.

And that’s what makes Covid-19’s long tail so stunning. Investors are already planning for a world where the coronavirus doesn’t exist; home prices in New York City are up 15% this year already, for just one example.

But let’s not get ahead of ourselves. Stuck-at-home stocks are going to outperform in the near term. And once we do go back to normal, it will be a future that’s unrecognizable from the world we once knew.

P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at moonshots@investorplace.com or connect with me on LinkedIn and let me know what you’d like to see.

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On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.