The Delta Trade

Something has piqued my interest in the last few days. The Delta variant is sweeping through the nation, which has resulted in reimposed indoor mask mandates, increased hospitalization rates, and increased timelines on self-imposed work from home mandates by private companies. Robinhood debuted as a public company only to drop 8% on the first day of trading. That seemed absurd because its very customers are infamous for propping up stocks well beyond any reasonable measure of valuation. Well, just a few short days later and it’s up a whopping 90%. That means $MEME stocks are alive and well. And if this Delta variant keeps us glue to our screens in our bedrooms, $MEME stocks are likely to have a resurgence.

The Delta variant is actually worrying and frustrating. It’s important to reiterate, 99% of deaths and 97% of hospitalizations are attributed to UNvaccinated people. But breakthroughs are are becoming more common and I certainly don’t believe it’s at only 10%.

I don’t have any evidence for this, but vaccinated people who have been reintegrated to society and get an illness are not getting tested. The vaccine is obviously effective at reducing symptoms and shouldn’t hamper mobility as long as the UNvaccinated don’t clog up our hospitals. Even Mitch McConnell who recently got Covid and miraculously praised the vaccine for reducing his symptoms, said it ‘felt like a sinus infection’. It’s hard to have sympathy for the UNvaccinated, but try and keep some for anyone who chose not to get the vaccine due to a compromised immune system. Reddit is doing a plenty good job with the posthumous shaming. But there is a renewed interest in the Covid news cycle and I’m going to go ahead and directly tie that to an increase in retail trading propping up covid-related companies well above their plausible value of discounted cash flows.

The WSJ quoted infectious-diseases expert Carlos del Rio saying, “If you’re vaccinated, you should not worry about the Delta variant.” Having just recovered from the Delta variant, I think he’s both right and wrong. If you have any comorbidities, it’s worth taking some precautions. I was out for 5 days. No fever, but I certainly wasn’t comfortable. If you are going to see any at-risk people, also take a pause. The Delta variant is wildly contagious and vaccinated people seem to pass it along at an alarming rate even if they are not symptomatic. All that said, if you’re vaccinated and not worried about getting the flu or strep, you probably shouldn’t worry about the Delta variant. But I’ll never stop anyone from taking whatever steps they want to be personally responsible for their health. The government’s job is to provide accurate information so we can make our own informed decisions, and it seems like they are. Also, people are looking for information.

But We’re Here for the $MEMEs

Ok great. I’m sure most of you have been devouring headlines about the Delta variant the last few weeks. Did you catch the news about the Lambda variant in South America? So why are we here really? Here’s why:

That looks a lot like the stocks that exploded last right after we digested the fact that we would be working remotely, would have limited mobility, and that there would likely be a successful vaccine.

Moderna: I’ve been holding this since March last year and WOW. It’s now a part of the S&P 500 and they just received FDA fast track designation for Respiratory Syncytial Virus (RSV) Vaccine (mRNA-1345). I obviously copy and pasted that. mRNA vaccines are all the rage these days. I’m not selling, but not buying any more because that stock has been on an absolute tear.

Novavax: The stock popped today because they sealed a deal with the EU for 200 million Covid-19 vaccines. They had a big pop in January, but haven’t seen their 52 week high of $331 since then. They were also trading at $4 in 2019. With a current market cap of $16.6bn, I think there’s a lot of room to grow here. I’m going to pick some up tomorrow.

Pfizer: I just bought this one. It looks like the FDA will give the vaccine full approval, as opposed to emergency approval, by September. Historically there’s nothing to suggest this stock will pop, but it’s a big pharma stock that can’t hurt to own in your 401k. They have the resources of a big pharma company and proved they are nimble enough to be first the the market with a vaccine that looks like it will get full approval. Bravo.

Catalent: Catalent provides advanced delivery technologies and manufacturing solutions for drugs, gene therapy biologics and products for the consumer health space. Catalent has partnering with JNJ, AstraZeneca and Moderna to provide fill-finish expertise to their supply chains and their biologics revenue, which represents 44% of their total revenue, is up 31% from the prior year. I’m honestly not sure why this company hasn’t manage to profit more from helping pharma companies manufacture vaccines. Whatever, I’m re-buying.

I also own JNJ. I’m going to look at buying all the other classic quarantine stocks like Zoom and AstraZeneca. Big tech is an obvious one, but I can’t buy any more of that. Clorox looks good, especially because it just took a 10% hit after posting a disappointing Q4 due to dwindling demand.

Pinterest is an interesting play. It just got crushed after earnings because its revenue guidance said it would be difficult to sustain its growth that it got after quarantine. Well, now that people think it’s going to contract this is a perfect time to surprise. I’m not going to buy now, but if mobility decreases and the stock doesn’t go up before the next earnings call, this looks like a solid buy.

Sell China…

Ok, that’s it for now. Oh and sell China. More on that later, but the Chinese government is intent on reminding Chinese billionaires and multinational companies that they need to understand their place in the system and fall in line. China is a state capitalist economy and it intends on staying that way. They do not allow Chinese companies to list shares on foreign markets (there’s a workaround through the Caymans, obviously) and if Hong Kong is any indication, there’s no way to stand up against the system, even on the global stage. Alibaba, Tencent, JD, Baidu and the list goes on, are all down 10 – 30% this year. I hope Jack Ma is doing ok. Some traders see this as an opportunity. I don’t. I’m even more concentrated on US equities than ever before.

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