Biotechs are having a field day on Wall Street as every day, a new 100% gain is coming across our desks. The unrealistic gains highlight just how unique the current bear market is. Mainly because a worldwide pandemic is not the typical root cause of financial crises. From the oil recession in 1973 to extreme tech optimism (dot com crash) to the subprime mess (2008), we can see how a pandemic triggering a financial crisis is rare.
However, COVID-19 should expose to investors the importance of understanding the ins and outs of the biotech space. Because when you think about our aging population demands the best medicine to sustain our higher life expectancy.
Today we see how the pervasive fear of COVID-19 saw a Sonoma Pharmaceuticals (NASDAQ: SNOA) surge by 100%+ at market open.
Why is SNOA up 150% today?
The Australian Register of Therapeutic Goods (ARTG) approved MicroSafe Care Australia’s hand sanitiser for use against COVID-19 in Australia. Essentially the ATRG believed that Sonoma’s sanitiser can destroy/neutralise (virucidal effect) COVID-19 from entering a healthy patients body. Sonoma manufactures the Nanocyn Disinfectant and Sanitiser product. Hence it was a significant achievement for the biotech partnership.
However, what exactly does the approval mean? In a nutshell, Sonoma can begin marketing MicroSafe’s sanitiser in Australia. The label will claim that the sanitiser holds a 30 second neutralisation (virucidal) kill time on hard surfaces. Considering Sonoma’s sanistiser is already active in the European and Middle eastern Markets, the addition of Australia bolsters the portfolio’s strength. Thus, buy orders went through the roof this morning.
Is a second wave fear fuelling hand sanitiser growth?
SNOA surged off the ARTG registration and not due to second wave fear. However, the fear of a second wave is looming. Because the COVID-19 is still alive, we are social creatures, and reopening the economy could cause the disease to proliferate. In turn, hand sanitiser stocks are seeing the bulls return.
Only time would tell whether the predictions are right. However, I would not be banking all my investments on a potential second wave.
Is SNOA worth the investment?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short answer: No, but add it to your second wave watchlist.
Investors jumping on the volcanic activity this morning will likely get burned by the lava. SNOA surged in a split second. It was either fast computers, insider traders, or long-term investors who benefited from today. Now you might feel a rush convincing you to invest because the stock must go up right? That rush is greed, and no, the inflated price usually evapourates moments after you place the buy order.
However, add SNOA to your watchlist. Because the ignition of a second wave would send the bulls to ride behind SNOA once again. Alternatively, you could wait for the sell-off during the day and then cement your position.(opinion not advice)
Like Warren Buffet says, “the stock market is like baseball, but you don’t have to swing at every pitch”.
As Warren Buffet said..
“Every day the stock market is going to pitch thousands of pitches to you and unlike a baseball game, you don’t have to swing at any of them”
Apply this to life
Wait for the FAT pitch opportunities and then pounce on them
— Podcast Notes 🗒️ (@podcastnotes) September 9, 2019
Thus, YIG’s biggest tip to traders just entering the biotech market is know when to swing. If you get pitched, a hot stock that exploded at market open do not swing. Instead, do the due diligence research biotech companies. Make sure you understand their clinical timeline, the investor sentiment, and their history of success or failure. Then when you have one lined set entry point and an exit point and when the time comes knock it out of the park. Because the last thing you want is to develop a negative relationship with the biotech market by getting burned off sell-offs.
If you are interested in hand sanitiser stocks then check out these five ASX stocks. Because if a second wave comes, we could see these sanitiser stocks explode.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick Mcloughlin, Senior Manager of YIG.